Sell Garrett Motion

May 22, 2025

GTX: $11.16

Market Cap: $2.3BN

EV: $3.7BN

Total Return: +55%

Summary

I’m closing my Garrett Motion (GTX) recommendation. I’ve been trying to understand why the stock has been so strong since reporting earnings, and I can’t figure it out. The quarter was fine but not exceptional. The story remains the same. Garrett remains a cheap stock and is actively returning cash to shareholders through dividends and share buybacks. Yesterday, we learned that PE owners Oaktree, Centerbridge and Cyrus, were planning to sell 17MM shares in a secondary offering. Shares plunged 13%. There are rumors that the secondary offering will be pulled (perhaps given the share fall in GTX’s stock price) and the stock is up ~8% today. I think a fair price is probably 8x FCF or $13.50. As such, the stock probably has ~20% of additional upside, but I’m happy selling now given the stock has rallied sharply in the past month and insiders are looking to sell.

Additional Details

Since reporting earnings on May 1, 2025, GTX is up ~21%.

While the quarter was strong (top and bottom line beat) and management indicated that all tariffs will be passed through, the stock has been incredibly strong.

And insiders have been selling…

On May 20, 2025, Garrett announced that PE owners Oaktree, Centerbridge and Cyrus, were planning to sell 17MM shares in a secondary offering. Shares plunged 13%.

In response to the decline in its share price, the company is no longer proceeding with the secondary offering. As a result, the stock is up ~8% today.

While it’s good to see that management and the PE owners are sensitive to the price that they receive, this recent news is a reminder that the PE owners are looking to sell.

Sure they will continue to have a large stake in the business, but they view the current price as a good enough price to sell 17MM shares.

In terms of potential upside, I think an 8x FCF multiple is reasonable which would imply a $13.50 price target and ~20% of additional upside.

While this is attractive, I have higher conviction ideas at the moment.

Why Garrett Might Have More Upside

The two catalysts that I was waiting for are:

  1. Inclusion in the Russell 2000 Index
  2. Inclusion in the S&P 600 Index
  3. Sell side initiations

If these catalysts occur, the stock could trade sharply higher.

GTX’s current valuation is not demanding:

Nonetheless, it doesn’t appear to be as much of a “no-brainer” as it once was.

Disclosure/Disclaimer:

Rich Howe owns shares of GTX but plans to sell them. All expressions of opinion are subject to change without notice. All published emails/articles/correspondence is provided for informational purposes. We do not warrant the completeness or accuracy of this content. Please do your own due diligence and consult with an investment adviser before buying or selling any stock mentioned on www.stockspinoffinvesting.com.