Is Goodyear a Good Investment?

PHOTO CREDIT: Goodyear

OVERVIEW

The Goodyear Tire and Rubber Company is a company based in the United States. The company designs, manufactures, and sells tires for automobiles, trucks, planes, and other vehicles around the world. The company also offers repair and other services related to its core tire business. The company was founded in 1898.

Why You Should?

  1. Goodyear is a great reopening play in an investor’s portfolio. The company saw a drop in demand for tires as people drove less as they stayed and did everything from home. However, once the pandemic is over, people will drive once again and the demand for tires will rise. This will help the company recover.
  2. The Biden administration will benefit the company as they will see lower costs and higher international sales. The previous administration caused trade tensions with our allies, something that caused the price of rubber to go up due to tariffs and also caused Goodyear to see lower international sales due to trade tensions. Biden looks to mend these relations with other countries.
  3. Goodyear will see surging tire sales as people purchase brand new cars and other modes of transportation. As this pandemic comes to an end, the demand for cars is sky-high (because people want to travel again). In fact, there are shortages of most cars as well. This will benefit the company and its investors.

Why You Should Not?

  1. Goodyear faces tough competition in the tire industry Some of these companies include Michelin, Continental, Pirelli, and many others. This competition might hurt the company and its investors in the future.
  2. The COVID-19 pandemic has hurt the company. The demand for tires fell as people stayed indoors and stopped driving. Supply chain issues and the falling demand for cars also hurt the company during 2020. The pandemic will continue to impact the company until the pandemic is over for most of the company’s products.
  3. The company also operates a fairly low-margin business due to the high costs of producing and selling tires as well as a competitive market. If there are any headwinds in the industry for tires, the company will report a small profit if not a loss in that particular financial year. This might hurt the company and its investors.
  4. Inflation might continue to hurt the company and its investors. The price of rubber and transportation continues to rise as the demand for these products and services rises. This will cause the company to raise prices on some products and also report fewer profits. This will continue to hurt the company until price levels return to normal.

MY OPINION

I think that Goodyear is a decent long-term investment due to its position as a good reopening play, surging car sales, as well as positive impacts from the Biden administration. However, some short to mid-term issues like the pandemic and inflation as well as long-term concerns like competition and a low-margin business might hurt the company and its investors.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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