Gentex Stock Drops as B. Riley Lowers Price Target to $32.50

Gentex Corporation (GNTX) shares fell in premarket trading on Wednesday, February 5, following B. Riley's decision to lower its price target for the company's stock. The investment firm adjusted its price target from $37 to $32.50, maintaining a "Buy" rating. This change comes after Gentex reported falling sales and earnings in the fourth quarter, sending shares lower by 12% to $24.95 in premarket trading.

The Zeeland, Mich.-based car-safety technology company posted a profit of $87.7 million, compared with $116.9 million in the same quarter a year ago. Earnings were 39 cents a share, missing analyst estimates by 10 cents, according to FactSet. Sales fell 8% to $541.6 million, well below the $601 million expected by analysts.

Light vehicle production was down 6% from last quarter in the company's primary markets of North America, Europe, Japan, and Korea. Shifts in the mix of vehicle builds it sold also drove the shortfall. About half of the shortfall compared with company guidance was from lower-than-expected shipments of full display mirror units, according to Gentex CEO Steve Downing.

The lower sales and weaker product mix dented margins, as Gentex couldn't leverage its overhead costs. Operating expenses increased by 22% in the fourth quarter, driven by staffing and engineering-related professional fees.

For 2025, Gentex forecasts $2.4 billion to $2.45 billion in revenue, which would be up from $2.31 billion last year. Analysts polled by FactSet had been projecting $2.58 billion.

B. Riley's price target reduction reflects the challenges Gentex faces in the current market conditions. The company's guidance for 2025 suggests a potential 7% outgrowth versus primary markets, driven by new product launches and technology investments. However, investors may be concerned about the company's ability to meet these targets, given the recent trends in sales and margins.

Gentex returned $316.5 million to shareholders in 2024 through share repurchases and dividends, indicating strong capital management and commitment to shareholder returns. However, if the stock price continues to decline, the company might choose to reduce or suspend these shareholder returns to preserve cash and focus on core operations.

Investors should closely monitor Gentex's performance and the factors mentioned above to assess the company's long-term prospects accurately. While B. Riley maintains a "Buy" rating, the lowered price target suggests that some analysts are becoming more cautious about the company's prospects.