There are thousands of stocks to choose from on the market, but not all of them garner attention as Adient has over the past year. This company is an interesting investment for several reasons, with arguments both for an against adding it to your portfolio.
With a unique history and series of events surrounding the company, many investors are wondering if this is the time to sell or buy in low and profit later. While we can’t answer that question for you, we can tell you everything there is to know about this stock. Here’ the skinny on Adient.
What Is Adient Stock?
You might have recognized this one as NYE: JCI or Johnson’s Controls prior to 2016. In the years leading up to Adient stock, Johnson’s Controls has severely underinvested in its business. To make up for this, JCI decided it would separate itself from the automotive supplier industry and quit investing into those divisions.
The CFO of Johnson’s Controls decided to jump ship during the split, leaving the Fortune 500 company behind to become the CEO of Adient. The company now primarily functions as a seating and interior supplier in the automotive industry. Based on production volumes, it stands as the largest supplier of these products in the world.
Adient’s products include everything from seating frames to the systems that move and heat them, along with things like armrests and head restraints. This allows them to manufacture complete seats for a vehicle, handling every aspect of design and functionality. The company manages over 200 manufacturing and assembly facilities in 33 countries.
The company also creates other textile parts for vehicles such as flooring. However, their seating manufacturing is the main component.
Market Cap and Recent Trends
As of this writing, one share of Adient stock costs $49.99 compared to its previous day’s close of $50.07. Keep in mind that prices are constantly fluctuating, and that price will either rise or fall in the time it takes you to read this article.
Its current five-day trend is in the green with an increase of $1.75. However, the monthly overview shows a sharp decrease after June 8th of $8.88. Both the one and five-year overviews show a steady decline from the continuous mid-80’s price range around 2017, keeping in mind that the company came into existence in 2016.
That’s not to say that Adient is only headed downhill from here. You’ll find proponents who say to hold for the long-term as well as those who advise selling any shares you might hold immediately.
Understanding the Falling Trend
Adient stock has declined due to catalysts in 2017 that continue to hinder the price into the current quarter. The first being a series of unexpected weather from August to September that crippled the company’s supply chain. Immediately afterward, a line of new seating structures launched only to prove unsuccessful, which hurt the company’s margin expansion.
Finally, a 16% drop occurred after CEO Bruce McDonald announced he would step down. In his place, interim CEO Frederick Henderson would step in. Henderson noted that poor execution and hurdles in seat structure business would result in less operating profit that the company had once thought.
The Argument Against
Many believe that recent events and trends surrounding Adient suggest that its shares have yet to reach their market low. The change in hands from one CEO to another give way to an increase in insider selling, for starters.
The industry Adient operates in is a tough one. Its competitive environment means the company must continuously invest in innovation if it wants to compete with the industry’s competitive prices. Auto makers want to keep costs low, but rising commodity prices can make that a difficult gap to close.
On a global scale, auto sales have peaked. This might lead to a reduced demand that would negatively impact the growth of the industry. When the industry suffers, so do the companies who operate within it.
In a recent statement, Adient noted that their 2018 revenue would not increase as predicted to over 17 billion. With their operating performance lower than expected, the adjusted outlook is now expected to top out around 1.25 million.
The company also mentioned that “lower earnings, increased cash restructuring, and a negative working capital trend” would decrease their expected free cash flow for the 2018 fiscal year. As of this writing, the approximation is set at $0 to a negative million. This could cause the company to rely on revolving credit in order to stay afloat, possibly hurting their ability to develop new manufacturing contracts.
Others note the company’s over 4 billion in debt, higher volatility, and lack of trust in new management. Combined, all of these factors might encourage you to sell your stock before it is too late. However, there are numerous proponents who say otherwise.
The Argument For
There’s plenty of reason to hold your shares, according to numerous experts. While there are uncertainties over leadership and execution, it’s worth noting that Adient remains the number one player in the automotive seating industry. They have heavy exposure growth overseas, a new airline seat joint venture with Boeing, and their prices can handle a downturn in the industry.
While holding for the short-term is risky, many believe that Adient’s current price is an excellent long-term hold for a Bearish turn. Given the new CEO and recent string of complications, it comes as no surprise that the company will need time to fix its falling trend and push back to all-time highs.
Currently in the Bear Market due to pessimism and share-selling, some believe that the turnaround will happen within the decade. Despite the company’s debts, it maintains enough current operating cash to cover those debts for the time being. Its short-term liabilities are also covered with current asset levels.
Some researchers believe the expected annual growth earnings lie somewhere around 140%, allowing Adient to exceed the United States of America market average and the low-risk savings rate of 3%. While 2018 and 2019 will see stagnation, some analysts believe that the company will see immense growth coming into 2020. However, there is always risk and uncertainty involved with these predictions.
The Bear Market
To help you make a better investment decision, it’s important to understand what the bear market is. By definition, it simply refers to a time period in which financial markets fall in value across the board. For reference, the bull and bear markets are near opposites.
A bear market is typically marked by the slowing of the economy and dropping share prices. As investors sell to protect their investments, the supply increases and the demand decreases. Many experts advise holding in a bear market, but Adient itself is in a bearish trend. So, what does that mean?
Just like market trends, Adient stocks are being sold as prices continually dip. Investors fear their shares will continually lose value for the foreseeable future, so they sell them off before their investments turn negative.
It’s impossible to predict whether or not this bearish trend will end. On the one hand, buying in low and holding on could yield incredible returns if the 140% prediction turns out to be true. On the other, you stand to lose money on your investment as the company continually sees a decline due to struggles.
Should You Buy Adient Stock?
We can’t answer that question for you, and even the best analysts are unsure of whether or not you will see a return on your investment. It comes down to whether you take a bullish or bearish position on Adient stock. Given all of the above information, you’ll have to decide if the stock price can climb to those high predictions or if it simply isn’t worth your dollar.
There are excellent arguments both for and against this stock, making a tough decision. The general consensus online is equally as mixed, with analysts flocking to both sides. The real test of this company will be how well they bounce back from the recent events that have caused their stock to lose value, and if they can increase the efficiency of their seating manufacturing production.
All in all, not could be as good of a time to sell as it is to buy in. It’s unlikely that Adient will fail as a company, but nothing is outside the realm of possibility when it comes to the stock market and economy.
Purchasing or holding Aident stock, however, is certainly worth your consideration. As a leader in their industry, it might only be a matter of time until investors see ample returns.