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JPMorgan: Goodyear Tire (GT) stock will gain traction after Friday's skid

By Daniel Tyson

14:40, 14 February 2022

Goodyear Tires store front
Goodyear Tires still has tread, despite Friday's lost, says JPMorgan - Photo: Shutterstock

Goodyear Tire and Rubber (GT) stock skidded last week, losing more than a quarter, but JPMorgan believes the company still has some tread.

Goodyear shares deflated by 27% Friday to $15.78 after the company said that inflation in raw materials and transportation could hurt its bottom line in the foreseeable future.

Despite the company's warnings, JPMorgan upgraded Goodyear's stock from neutral to overweight, writing in a client note that all signs showed the Akron, a Ohio-based company is handling inflation well.

At 9:40 am (Eastern Time Zone) Goodyear’s stock was up to $16.80, or 6.5%.

Rebound likely

JPMorgan revised its price target on Goodyear to $23 per share from $25. The new target is more than 45% above where the stock closed on Friday. Shares rose 2.4% in premarket trading Monday.


38,642.55 Price
+2.170% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 22:00 (UTC)
Spread 106.00


15,933.10 Price
+0.090% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 1.8

Oil - Crude

76.14 Price
+0.570% 1D Chg, %
Long position overnight fee -0.0165%
Short position overnight fee -0.0054%
Overnight fee time 22:00 (UTC)
Spread 0.040


0.62 Price
+0.600% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 22:00 (UTC)
Spread 0.01168

“Overall, the sell-off strikes us as an overreaction given what [we] foresee as much more modest needed reductions to consensus [segment operating income and free cash flow], and because pricing has been quite strong so far this cycle, with Goodyear posting its 6th consecutive positive quarterly Price/Mix-to-Raw Materials spread in 4Q, suggesting the possibility of better than currently envisaged ability to price for non-commodity costs,” wrote analyst Ryan Brinkman.

Downside risk

Much of the stock’s decline Friday is the downside risk from supply chain issues, he added.

“We believe non-commodity supply chain costs are now better appreciated, with the bigger risk to the downside likely relating to faster inflation of commodity costs (for example, on an oil price spike resulting from macro or geopolitical developments), although these costs are likely recoverable via pricing over time,” the note said.

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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