Shares of Magna International Inc were up more than 12 percent on Friday, a day after it posted a surprise quarterly profit and said it would focus on its core auto-parts business after the collapse of its deal to buy a stake in General Motors Co's Opel unit.
Magna, the world's third-biggest auto parts maker, reported its third-quarter results after market close on Thursday and said they benefited from higher than expected sales and stronger margins in North America.
The Canadian company also said it was not in discussions to buy a stake in any other automaker after GM's board reversed its decision to sell a 55 percent stake in German-based Opel to Magna and its Russian backer, Sberbank, for 500 million euros.
GM, which had been in negotiations with Magna for the better part of the year on Opel and had approved the sale, said improved business conditions and the strategic importance of Opel prompted the reversal.
Magna can now return its focus to its Tier 1 operations and potential earnings power in an environment of improving light vehicle sales and abundant market share opportunities for strong suppliers such as itself, Fadi Chamoun, an analyst at UBS, said in a note to clients.
UBS raised its rating on Magna stock to buy from neutral and increased its 12-month price target to $60 from $55.
Magna's shares were up C$5.78, or 12.3 percent, at C$52.85 on the Toronto Stock Exchange on Friday morning. Its U.S. shares were up $5.14, or 11.6 percent, at $49.34.
Hitherto, Magna's pursuit of an equity stake in Opel had prevented us from taking a more constructive view on the stock, Chamoun said. The sale has since been terminated by GM, and we believe that a significant overhang has been removed from the shares.
BMO Capital Markets raised its price target for Magna to $70 from $63, and Citigroup increased its target for the company to $60 from $58.
(Reporting by John McCrank; editing by Peter Galloway)