Magalu’s shares fall 30% in the year: is the company no longer the stock market’s darling?

One of the darlings of the Brazilian investor, the action of Luiza stores (MGLU3) presented a drop of more than 30% since the beginning of the year, until the closing of the stock exchange session last Tuesday (14). The company’s paper now costs around R$17, after having surpassed R$25 in January. Shares have fallen almost 40% since their historic peak in November last year, when they were R$27.34.

Did Magalu’s stock market performance hit the ceiling? O UOL spoke with financial market analysts who point out the reasons for the drop in the shares of the market leader retailer and whether there is prospect of new valuations on the stock exchange. See what they said below.

There is no short-term recovery, analysts say

to John Abdouni, an investment specialist at the firm Inversa, there should be no return to the share values ​​registered at the end of last year, at least in the short term. He predicts new devaluations for the coming months.

“The company is good, it has been growing well, but perhaps the market has exaggerated a little in relation to its fair price. We are seeing a correction now,” says the analyst.

According to him, the country’s economic growth prospects are modest this year — which worsens the trade situation as a whole.

According to data from the Central Bank’s Focus bulletin, the market reduced its GDP growth forecast for this year, from 5.28% to 5.04% in one month.

For Abdouni, although the company remains the best option in retail, he does not recommend the purchase or sale of the papers at this time. It is best to hold back and wait for the worst to pass.

To André Pimentel, partner at the business consulting Performance Partners, a resumption of stock appreciation in the short term would depend much more on speculative movements than on macroeconomic issues or even on course corrections within the company.

“Magalu, as it is one of the main roles of the retail segment, would end up being the priority target of these movements”, he says.

In the long term, the company is still the right bet

Speculative movements aside, the company’s long-term trajectory should continue to be bullish with an improvement in the economic environment, says Pimentel.

“I still think it’s a very right bet. If you think about a return to a certain normality, with Brazil growing at some point, Magalu is the best positioned company”, he says.

Jessica Sprovieri, analyst at the analysis house Inside Research, says the recommendation is to buy at this time of low.

“We remain optimistic with Luiza stores, believing that the company should continue to be successful in developing a very diverse and integrated ecosystem,” says the analyst.

Company stopped being the darling of investors?

Experts agree that Magazine Luiza should not lose its role as an investor’s darling action among retail companies.

A Street (VIIA3 – old Via Retail), the company’s main competitor, saw its actions fall on since August, going from R$ 10.6 to 9.05 last Tuesday (14), which reinforces the thesis that the negative movement of the market leader is a situational issue.

Pimentel assesses that Via has the capacity to gain space in the digital market, but its potential is limited compared to Magalu.

“The Brazilian market is capable of having another important company in this type of business, but there is a very long distance between Via and Magalu, which has a work that has been the result of many years, built with persistence. Via has had a trajectory full of obstacles” , he claims.

For the short term, Abdouni believes that the difference in value between Magalu and Via on the stock exchange should decrease. The analyst says that the market must correct the difference between competitors.

“Magazine Luiza is a better company than Via, but this price difference is discrepant”, he says.

He considers that, despite the reduction of the abyss that should happen between competitors, Magazine Luiza remains the best deal for the long-term investor.

Via slope at Magazine Luiza

Contrary to the specialists interviewed by the report, economists from the analysis house Levante Ideias de Investimentos changed Magazine Luiza for Via in the portfolios recommended to readers of UOL.

The company accumulates fall of 14% this year, until the session last Tuesday (14). However, house analysts believe it’s time to buy the company’s shares.

“Via’s shares were already discounted (worth less than they should be) when we included them in the portfolios. However, with the stock market’s latest downward movements, the shares suffered heavily, becoming extremely ‘crumpled'”, says Felipe Bevilacqua, analyst at House.

“This makes the shares have an even greater potential for appreciation, as the projections remain the same, but now starting from a lower price. And for those who bought the shares with a price slightly above, it’s time to improve the what we call the average price (PM) and take greater advantage of this potential for appreciation,” says Bevilacqua.

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