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Monday, January 30, 2023

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Magazine Luiza (MGLU3) accumulates a 60% jump in the month; pierced or opportunity?

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THE Magazine Luiza (MGLU3) is one of the main highlights of the year, with the action shooting up 60% in just over 20 days. So far, the paper leads the rise of the Ibovespa (IBOV) in January, rising more than twice as much as the runner-up, 3R Petroleum (RRRP3), which accumulates appreciation of 20%.

In this session, the paper soared again, closing at an increase of 8.66%, at R$ 4.39.

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But how far does this momentum go? Is it sustainable? Time to buy? According to analysts who spoke with the Money Timesthe reason for the appreciation is simple: investors migrated from Americans for the company.

Since the company announced the R$ 20 billion shortfall, the stock AMER3 collapsed 92%.

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“Usually you have sectorial compositions of some funds. Such as Americans had the Sergio Rial, a lot of people bought it, expecting a management shock. With the frustration, there was an escape”, says Gustavo Cruz, chief strategist at RB Investimentos.

See the graphic below:

Leandro Petrokas, research director at Quantzed, recalls that the market is understanding that the company will win the market share (market share) of Lojas Americanas, “since they are direct competitors, mainly in e-commerce”.

He also points out that the market, at least so far, has chosen the Magalu as darling, since the action of Via (VIIA3) rises only 6% in the year.

In a report, the Citi expects the gross revenue from online sales (GMV) of the Magazine Luiza grow 18%, considering the absence of Americans in the market.

Another point remembered by analysts was the macro side. Régis Chinchilla and Luis Novaes, from Earthpoint out that macroeconomic aspects are very important for retail companies.

“There was a great expectation of high interest rates and inflation for the coming years. With the first measures announced by the government, such as the fiscal package, likely recomposition of fuel taxes, some campaign promises left for 2024, this perspective has become less negative”, they argue.

Is it time to buy Magazine Luiza?

Even with the jump, analysts don’t feel comfortable recommending the shares of the Magazine Luiza. Cruz, from RB Investimentos, says that the company is still going through the same difficulties as before.

“The operating result may even be better, but it will be compromised by the financial part. It went into debt when the interest rate was less than 2%, but now that debt burden is very heavy on the company. It will not be one of the highlights of the year”, he predicts.

Petrokas of Quantzed says that after such a strong rise in such a short period of time, “I don’t think it’s a good time to buy.”

“It would still be too early to point out the Magazine Luiza as the real beneficiary of the case Americans. Perhaps we are moving a little too far. I would wait some time for the unfolding of the Americanas case”, she observes.

Rodrigo Cohen, CNPI analyst and co-founder of Escola de Investimentos, mentions retail risks. “How many times, without any reason, has this stock gone up? It’s not worth the risk,” he reckons.

Finally, analysts Earth say the outlook is still uncertain.

“Interest rates should continue to pressure companies and inflation could have a negative effect on sales. Therefore, the most defensive sectors or those with less exposure to interest rates and inflation should continue to be preferred in the market”, he adds.

Source: Moneytimes

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