Why Goodyear Tire Shares Might Stop Rolling

Why Goodyear Tire Shares Might Stop Rolling

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Goodyear Tire & Rubber sank 3% this morning after Deutsche Bank downgraded the tire manufacturer from buy to neutral.

So what: Along with the downgrade, analyst Rod Lache lowered his price target to $26 (from $29), representing about 15% worth of upside to Friday's close. While Lache remains positive on Goodyear's potential to outperform in the short run, he cautions that industry headwinds could weigh on the stock in two to three years.

Now what: Deutsche sees some clouds of uncertainty brewing over the intermediate term. "We have increasingly focused our attention on the steady drumbeat of new tire capacity announcements, and the record high levels of capex from the Global Tire Industry," Deutsche noted. "Our conclusion is that the mid-term (i.e. 2-3 years) outlook for margins (due to supply/demand and competitiveness) may not be as clear as it has been in over the past 2-3 years." When you couple that downbeat view with Goodyear's big run in 2013 -- shares are still up more than 100% from its 52-week lows -- it's tough to disagree with Deutsche's decision to downgrade.

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The article Why Goodyear Tire Shares Might Stop Rolling originally appeared on Fool.com.

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