Notably, MOS stock's FY24 normalized P/E would increase to 10.2x. However, as seen previously, we reminded investors to use the FY24 EPS estimates as a basis, given the steeply declining EPS estimates. MOS stock last traded at an NTM normalized P/E of 3.97x or GAAP P/E of 4.3x. We are targeting a potential consolidation zone at around the $29 level (an implied downside of 42% from the current levels). As a result, investors still have an opportunity to cut exposure before the market makers force the price down inevitably. Notably, the trap door has yet to be shut. However, the price action for May has not been completed yet, but the signs are ominous. It followed up with another one in May as it drew in the buyers post-earnings. Our price action analysis suggests that the market makers have set the trap since April. Price Action Suggests The Bull Trap Has Been Set - Increased Caution With this in mind, investors are urged to use FY24's EPS estimates to evaluate the valuation for Mosaic stock. Investors should note that Mosaic's EPS is estimated to fall from $14.33 to $6.44 through FY24, posting a steep decline at a CAGR of -33%. Mosaic GAAP EPS consensus estimates (S&P Cap IQ)Ĭonsequently, its GAAP EPS is also estimated to fall significantly in FY23 from its peak in FY22. Furthermore, its adjusted EBIT margins could also be impacted markedly, with peak profitability expected in 2022.
However, the Street estimates suggest that Mosaic's revenue could peak in FY22 before declining significantly from FY23. But, of course, no one can tell precisely when the tight supply situation will abate, as it takes time to play out. The critical message from management's commentary is that the current situation will not last indefinitely. And then even then, it probably will take 2 to 4 years after that for the deficit to catch up. And so in 2023, we still expect Belarusian sanctions, but we think at least the Russians will find more ways to get their product to market. We think the Russians will find ways to get things out by probably next year. However, it also added that Russia could circumvent the harsh sanctions next year. The company remains confident that the market remains tight for potash well beyond 2022. As a result, Mosaic's FY22 revenue estimates have been revised to $22.09B, from $19.34B previously. Moreover, its revenue and profitability estimates have been revised upwards for H2'22, as the Russia/Ukraine conflict has continued. Furthermore, its adjusted EBIT margins remain robust at 30.8%, but below the consensus estimates of 31.9%.
However, it came in below the consensus estimates of 77.7% growth. Mosaic reported revenue of $3.92B in FQ1, up 70.8% YoY. Mosaic revenue change % and adjusted EBIT margins % consensus estimates (S&P Cap IQ) The Massive Gains Would Not Continue Indefinitely They can also cut in phases to capitalize on the upside volatility to sell into potential rallies. We urge investors to cut their exposure to MOS stock. Therefore, we revise our rating on MOS stock from Hold to Sell. But, don't wait any longer because once the trap door is shut, the downdraft could be massive and rapid as the marker makers digest those significant gains. Our price action analysis after its Q1 card suggests that the trap has continued to draw in buyers. The Mosaic Company ( NYSE: MOS) has seen massive interest from retail investors in 2022 as its stock continued its downtrend reversal from its COVID bottom in 2020.ĭespite a solid Q1 card in early May, we maintain our conviction that investors should capitalize on the current levels to take profit (partially or fully) and not ignore the massive bull trap already formed in MOS stock. Halbergman/E+ via Getty Images Investment Thesis
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