On December 9, 2022, in the wicked sell off into the close, Adient $ADNT stock broke below its 200 day moving average. The stock has also broken uptrend channelUptrend and downtrend channel patterns are technical analysis tools used to identify potential future price movements. They are formed by two parallel lines on a chart and can be u... support.
The stock is falling because its a consumer cyclical stock tied to the future of the used cars market. The used cars market has crashed because of rising interest rates.
Worse, the company has a high level of debt. It has a Debt to Equity ratio of 1.24 where the Auto Parts industry average is 0.37, meaning that Adient is more dependent on financing that its industry peers. The company has an Altman-Z score of 1.81 which suggests that the company is in the distress zone and has some risk of bankruptcy. In a rising rates environment, it may force the company to dilute its stock in order to raise money. Instead of paying down its debt, the company recently announced a $600 million share buyback program. This seems to be a questionable use of capital considering the sizable debt maturity due August of 2024.
Adient downgraded at Deutsche Bank
Emmanuel Rosner, a Deutsche Bank analyst, downgraded Adient on November 8, 2022 from Buy to Hold with a $39 price target. According to Rosner, any potential earnings growth appears to have been largely factored in following the stock’s run-up between October 13, 2022, and November 11, 2022. The analyst claims that an uncertain industry volume recovery will have a significant impact on Adient’s 2023 outlook.
