AKRON—Goodyear lost 42 percent of its market value in 2018, as its stock plummeted from more than $34 a share to about $20 per share between Januaries.
The company has been facing a challenging environment, with high raw material costs, a tough market for price increases, lower demand for its tires in the U.S. and some other markets, and a slowing Chinese economy.
So, what's in store for the Akron icon?
The company and at least some of the analysts following it think Goodyear can wait for conditions to swing around in its favor, something the 120-year-old company has done many times. But others say it could face pressure to change, possibly even from an activist investor if one chooses to take advantage of the company's vulnerable position.
"It's not a vote of confidence when your stock drops from $40 to $20. I'm surprised there's not an activist in there now," said Anthony Deem, an analyst who follows Goodyear at Independence-based Longbow Research.
Deem, often critical of Goodyear, has not been taken totally by surprise by the drop in the company's stock.
"I didn't think the stock would drop as precipitously as it has, but I think it's justified," Deem said.
Others think the market has overreacted and don't blame Goodyear.
"The tire business is one that's incredibly complex," said John Healy, an analyst at Northcoast Research in Cleveland. "There's a chemistry business to it in terms of research and development and creating a quality product. Then there's a very challenging manufacturing side of things, and there's the sales on a global basis. …Then there's also the impact of raw materials and foreign exchange (currency) movements. It makes it just a tough business to manage."
Healy, a value investor, has a buy recommendation on Goodyear's stock.
He and Deem agree, along with the company, on some of the things Goodyear needs to do: Build and maintain capacity for high-value tires, enforce higher pricing, regain some market share at home and abroad, and, perhaps most important, stop surprising the markets with bad news.