What does Trajano’s departure from the Forbes billionaires list say about investing in Magazine Luiza (MGLU3)?

luiza trajano
Magazine Luiza’s parent company, Luiza Trajano, dropped out of Forbes’ list of billionaires this month (Image: Twitter/NYSE Reproduction)

Luiza Trajanoparent company of Magazine Luiza (MGLU3), left the list of billionaires Forbes In this month. According to the publication, the businesswoman, who has already accumulated US$ 5.6 billion, has been seeing her fortune fall since mid-2021.

His departure from the ranking of billionaires comes after a drop in actions of Magalu, which interfered with its patrimony.

In one year, the retailer’s shares plummeted nearly 90%. In the accumulated of 2022, the shares show losses of 63.2%.

The company is part of one of the most penalized sectors on the Stock Exchange, highlights XP Investimentos. The broker mentions that the e-commerce sector is affected by the macro deterioration, with more persistent inflation than projected, in addition to the conflict between Russia and Ukraine and the continuity of lockdowns in China.

The purchasing power of Brazilians has felt a strong reduction, which, combined with a scenario of strong interest rates, results in a highly weakened demand for consumer goods, says XP.

“The increase in the cost of capital and competition and the change in the market’s focus also weigh on the sector”, adds the broker.

Trajano’s departure from the ranking of billionaires had great repercussions. But other entrepreneurs have also seen their fortunes shrink to below $1 billion.

Also out of the list are Rubens Menin, co-founder and CEO of the construction company MRV (MRVE3), and brothers Jorge Koren de Lima and Candido Koren de Lima Jr, who are on the board of hapvida (HAPV3) and are sons of the company’s founder.

Like Trajano, the entrepreneurs left the ranking after the fall in the shares of their respective companies.

Is it worth investing in Magalu?

At the moment, XP retail analysts have a neutral recommendation for Magalu stocks – and for all stocks in the sector – as they see a still challenging macro scenario ahead.

“Both from the point of view of inflation (which should remain close to the double-digit level throughout the year), as well as of interest rate (with at least one more high expected in Brazil and a cycle yet to come in the US)”, they highlight.

In the first quarter of 2022, Magazine Luiza presented mixed results, with growth pressured by the macro scenario and cash burn, while profitability showed signs of improvement.

For XP, MRV shares are discounted

According to analyst Ygor Altero, with challenging inflation and high interest rates, most companies in the construction sector had difficulty passing on prices, given the more limited purchasing power of the consumer.

However, for MRV, the more challenging cost dynamics within the Casa Verde e Amarela (CVA) program increased, mainly, the difficulty in the operation of small operators, which have a relevant participation in the program.

“This, consequently, should reduce competition within the segment”, points out Altero. The analyst believes that MRV should benefit from gaining share within the CVA.

“In addition, AHS (MRV’s North American subsidiary) has shown a positive performance, which has supported the company’s results”, he says.

XP’s analysis team sees MRV’s shares discounted and has a buy recommendation for the company, with a target price of BRL 19.

XP recommends buying Hapvida shares

Hapvida presented a result below that expected by XP in the first quarter of the year, with adjusted net income of R$ 78 million. In the company’s balance sheet analysis, the broker’s experts pointed out that organic growth is still a problem.

The high loss ratio also contributed to the negative data. The indicator remains pressured by costs related to Covid-19, acquisitions and negative price adjustment of individual plans.

However, XP’s view remains positive for Hapvida. For analyst Rafael Barros, “the merger with the NotreDame Intermédica Group (GNDI) should create considerable synergies”.

XP’s recommendation for the shares is to buy.

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O Money Times publishes informative articles of a journalistic nature. This publication does not constitute investment advice..

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About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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