Here is Why Goodyear Stock Could Bounce Back, But Not Until 2023

GT is down over 46% in 2022

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The Goodyear Tire & Rubber Company (NASDAQ:GT) is down 3.7% at $11.85 today, just a few sessions removed from its first-quarter earnings and revenue report in which it posted a top- and bottom-line beat. While it enjoyed a pop on the day, this positive price action was swiftly rejected by the descending 60-day moving average, which sent it back towards its March 8 annual low of $11.64. This year, GT has lost 46.6%.

gt chart may 9

Putting pressure on shares today is likely a price-target cut from J.P. Morgan Securities to $22 from $23. The 12-month consensus price target of $18.75 remains at a 58.3% premium to current levels, however. Meanwhile, of the six analysts in coverage, two say "strong buy," and four say "hold."

Short sellers, on the other hand, have been building their positions. Short interest rose 17.4% in the last two reporting periods and now makes up 7.2% of the stock's available float, or a little less than three days' worth of pent-up buying power.

Circling over to options activity, these traders have been incredibly bullish. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 28.71 calls have been picked up for every put during the past two weeks. This ratio sits higher than 85% of readings from the past year, indicating a much healthier-than-usual appetite for long calls of late. 

Drilling down, Goodyear stock offers an intriguing valuation at a forward price-earnings ratio of 6.55 and price-sales ratio of 0.21. GT is also estimated to grow revenues by outstanding 17.2% for fiscal 2022, as well as increase revenues by another 3% for fiscal 2023. However, Goodyear has struggled to produce a consistent growth rate over multiple years. More specifically, the company reported back-to-back years of top and bottom line declines for fiscal 2019 and fiscal 2020.  

Moreover, Goodyear holds $8.42 billion in total debt and only $1.09 billion in cash on their balance sheet, making GT a riskier long-term investment. Still, Goodyear stock's extremely low valuation and positive 2023 outlook could make it a potential recovery play for the coming year.


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