THE Magazine Luiza (MGLU3) was one of the biggest negative highlights in 2021.
The stock melted as fast as it rose, regressing to 2019 price levels. So far, paper remains a seesaw in the stock market, accumulating a fall of 7.6% in the year.
Even so, the Goldman Sachs maintains optimism with the company for the next 12 months.
The bank revised the target price from BRL 13 to BRL 12, a 94% upside potential, but maintained its buy recommendation.
“While multiples are unlikely to return to historic peaks, we believe the worst is already included, after reclassifying a five-year EV/GMV (firm value over gross commodity value) average of R$12 million” , argues.
The bank also explains that, at this level, the action offers a potentially attractive entry, which points to a natural share gain within a very fragmented home furniture market.
Remembering that Magalu has a 20% share of the market share.
…but it won’t be easy
Goldman adjusted the metrics to suit the toughest scenario in the economy.
In the second half of 2021, the bank cut revenue estimates by 2%.
However, in 2022 and 2023 this is more than offset by the contribution of Kaboom, leading to an average of 3% compared to the previous estimate.
In addition, there was a drop in gross margin and operating leverage, causing Ebitda, which measures operating income, to have an average reduction of 7% from 2021 to 2023.
Already the projection of the net result fell 14%. According to analysts, this is mainly explained by Ebitda and the increase in net debt after the acquisition of Kabum.
Among the main risks, Goldman cites increased competition from incumbents and new entrants to the business market, higher-than-expected investments, negatively pressing margins, in addition to cash flow and higher-than-expected returns and logistics costs, a as growth moves to regions with lower density.