Westport Fuel Systems Inc

Westport Fuel Systems Inc (TSX: WPRT) is a Canada-based company that engineers, manufactures and supplies alternative fuel systems and components for use in transportation markets.

Why should investors exit?

• Poor performance of Independent Aftermarket Segment: Revenue in the Q3Y21 was CAD 26.3 million respectively, compared with CAD 28.0 million reported in Q3FY20. Revenue for the third quarter decreased by CAD 1.7 million year-over-year because of a slowdown in sales due to supply chain issues, including semiconductors shortages. And the trend in expected to continue in the upcoming quarters as well.

• Reported bottom line losses in Q3FY21: The company reported a net loss of CAD 5.8 million Q3FY21 compared to net income of CAD 0.8 million for the same quarter of last year. The CAD 6.6 million decrease in earnings was primarily the result of increases in research and development expenditures and general and administrative expenditures, lower foreign exchange gain and increase in income tax expense compared to the prior quarter.

• Technical weakness: WPRT shares are hovering in a long-term bearish zone, as its shares traded well below its crucial short-term as well as long-term support levels of 50-day and 200-day SMAs. Moreover, the leading momentum indicator 14-day RSI is hovering in a neutral zone with bearish bias at 41.96, implies that further downside is possible from the current trading levels.

Technical price chart (as on December 29, 2021). Source: REFINITIV, Analysis by Kalkine Group 

Stock recommendation

Auto ancillary sector is witnessing humongous challenges ranging from heightened inflationary pressure, semiconductor shortage, and resurgence is COVID-19 cases could impact their supply chain network. Further, from the technical standpoint, its shares are hovering in a steep bearish zone, as its shares traded well below its crucial long-term as well as short-term support levels of 200-day and 50-day SMAs. Therefore, we recommend a “Sell” rating on “WPRT” stock at the closing price of CAD 2.87 (as of December 29, 2021).

1-Year price chart (as on December 29, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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