Several of our stocks have reached/exceeded our price targets, so we are making changes to several of our ratings:
GameStop (GME) – moving to Sell
GME shares have surged past our 16 price target to nearly 19 this morning. While promising, the turnaround from here is complicated, with major secular headwinds. The remaining potential reward to investors is very high but the risk is huge, as well. We are moving GME to a Sell with an 84% gain from our initial recommendation price of 10.29, in April 2019, and for those who bought when the stock was stuck in the 3-6 range for a year, the gains are much higher.
Freeport-McMoran (FCX) – moving to Sell
FCX shares have touched our recently-raised 24 price target. The stock, up nearly 100% this year, has returned to its 2015 price level after languishing for years at much lower prices. Commodity copper prices are at $3.50/pound, about as high as any point in the past decade other than a period in 2010-2012 when the metal traded in the $3.50-$4.00/pound range. Since then, Freeport lost much of the rights to its highly lucrative Grasberg mine in Indonesia, although it is working to replace that value with other ventures. All-in, the risk-return now appears quite unfavorable and we are moving FCX to a Sell. While the holding has been about breakeven since we initially recommended it in August 2013, the shares have produced sizeable gains for any positions established in the past five years.
General Motors (GM) – raising target to 49 from 45
The stock has exceeded our 45 price target and is now trading at a post-bankruptcy high after struggling for years in a narrow range around their 33 IPO price. Given the company’s impressive leadership that has structurally lifted its profitability as well as made meaningful advances in electric vehicles, we are raising our price target to 49. We’ll admit some hesitancy in raising the price target – GM has been a chronic disappointment for decades, with many false dawns. However, to push the analogy, the stars do appear to be aligning this time.
Adient (ADNT) – raising price target to 35 from 28
ADNT shares have surged past our 28 price target and are now trading at close to 32. The company’s turnaround is making outstanding progress despite a difficult start right after our Buy recommendation. This morning, Adient reported a strong fiscal fourth quarter, with adjusted net income rising 85% from a year ago despite an 8% decline in year/year revenues. The balance sheet is in good shape and the company provided encouraging guidance for next year. Given Adient’s strong position in the rapidly-recovering auto industry, its divestiture/clean-up of some of its Chinese joint ventures and its impressive leadership, we are raising our target to 35.