Magazine Luiza shares (MGLU3) are today (23) among the highest of the day, with an increase of 9.02%, being traded at R$ 2.66 around 1:10 pm. With a year-to-date fall of 60% in asset value, does this rise mean that something has changed?
“No,” says PagBank’s chief analyst, Marcio Loréga. “What’s happening is a ‘pullback’ movement,” he says. When a stock depreciates too much, investors end up making the opposite movement to the market, the “pullback”, and buy the stock that has been devaluing to take advantage of bargains. But does that mean that from now on the action can appreciate? See analysis below, in exclusive material for subscribers.
“The latest information given by the Central Bank is that the policy of high interest rates will continue and that it should not change at least until 2024. So there is nothing on the horizon that can reverse this scenario for Magalu”, says the analyst.
In Magazine Luiza, according to company data, of the company’s total sales in the first quarter of this year, 73% were made on credit. That’s why the performance of the retailer’s share is so intertwined with rising interest rates: the higher the rate, the lower the sales.
In August 2020, the scenario was the opposite. The rate dropped to 2%, sales picked up and in that year the company’s shares appreciated by 109.6% and the share came to cost R$ 28.24 each.
And what to do with the shares?
“Although we believe that there is still plenty of room for the company to grow, we see a challenging short-medium term scenario”, says XP, in a document for investors. The broker’s recommendation is neutral: neither buy nor sell. The macroeconomic deterioration, which tends to reduce disposable income, impacting the demand for durable goods, is still expected to have a major impact on Magalu, says XP.
But Mirae Asset believes in a recovery and that the action will cost R$ 8.19 again in 12 months.