Aptiv's (APTV) product differentiation and integration into megatrends within the automotive industry position it well for growth, given that it develops and manufactures components and technology related to automobile safety and "connected" features, according to a research note from D. A. Davidson.
The company's electrical distribution solutions have shown evidence of reducing weight and lowering manufacturing complexity, which is necessary to bring electric vehicles to a cost and practicality that will lead to mass consumer adoption, Joseph-Andrew Malach, a research analyst with D. A. Davidson, said in the note.
Further, the company's Smart Vehicle Architecture integrated solutions have shown "encouraging signs as [original equipment manufacturers] that have traditionally developed in-house solutions look for advanced solutions with lower investment," Malach said.
Demand for EVs will increase with time, but hurdles remain for its mass adoption. Aptiv's addressable content per vehicle will likely increase across all powertrain types as the Advanced Driver Assistance Systems technology progresses.
The analyst said Aptiv has a "diversified end-market and regional exposure," with a customer base of the world's 25 largest automotive original equipment manufacturers.
He said the company is targeting growth-over-market of about 6% this year and 6%-8% next.
"On top of above-industry revenue growth, APTV also has a pathway to margin recovery as a recent period of higher investment tapers, supply chain, and cost headwinds ease, and sales increase," Malach said in the note while initiating coverage of the stock with a buy/add rating and $90 price target.
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