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Aptiv PLC‘s price target was raised to $150 from $63 with ‘Overweight’ stock rating, according to Morgan Stanley equity analyst Adam Jonas, who said that after coming out of the COVID-19 era, Aptiv’s portfolio is on the verge of a transformation that will alter the stock’s narrative, driving a multiple re-rating.

In July, the Jersey-registered auto parts company reported a second-quarter 2020 U.S. GAAP loss of $1.43 per diluted share. Excluding special items, the second-quarter loss totalled $1.10 per diluted share.

These results include the adverse impacts of global vehicle production declines of 45% in the second quarter, largely resulting from the ongoing impacts of the novel coronavirus pandemic.

“We think the rapidly changing mix of key revenue drivers of Aptiv lends itself to a change of divisional reporting structure. We believe the way Aptiv currently reports via two segments does not sufficiently capture the specific drivers of secular growth. Our bull case valuation of $225 assumes that the ADAS business is valued similar to the Mobileye acquisition multiple, Other User Experience segment is valued at 20x EBITDA and the BEV Power & Signal business and Mobility & Services are valued at strategic multiples,” Morgan Stanley’s Adam Jonas said.

“We argue investors will need to think out three to five or even five to 10 years in their DCF models to fully capture the compounding growth opportunity embedded in Aptiv.”

Aptiv stock rose about 4% to $86.30 in pre-market trading on Friday; however, the stock is down over 12% so far this year.

Several other equity analysts have also updated their stock outlook. Evercore ISI raised price target to $110 from $85; UBS upped their target price to $100 from $86; Citigroup increased their price target to $95 from $84 and Credit Suisse raised target price to $91 from $88. Oppenheimer raised price target to $95 from $83; Deutsche Bank lowered their target price to $91 from $93; RBC cuts target price to $92 from $94; Jefferies raised target price to $96 from $79 and JP Morgan upped their target price to $89 from $73.

Nine analysts forecast the average price in 12 months at $89.11 with a high forecast of $110.00 and a low forecast of $63.00. The average price target represents a 6.99% increase from the last price of $83.29. From those nine equity analysts, seven rated ‘Buy’, two rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

“+6% to +8% growth over market is best in class, with exposure to secular narratives around electric & autonomous vehicles. For electric vehicles, the Signal & Power Solutions business is growing +4% to +6% growth over market, with a favorable mix of Electrical Distribution Systems vs. Engineered Components,” Morgan Stanley’s Adam Jonas added.

“For active safety, based on the bookings, Aptiv is on track to be the industry leader in Active Safety. For autonomous vehicles, Aptiv has the world’s largest autonomous commercial mobility service in Las Vegas, with operations in Boston, Pittsburgh, Shanghai, and Singapore.”

Morgan Stanley highlighted electric vehicle penetration, active safety penetration and spin of signal & power or user experience as major upside risks to the stock.

However, Morgan Stanley’s gave a stock price forecast of $60 under the worst-case scenario.

“Where could we be wrong? the market may be reluctant to re-rate Aptiv higher as it may still view Aptiv through the lens of an auto supplier and may not rate its potential future recurring revenues, or ascribe premium valuations to its electric vehicle/automated vehicle (EV/AV) expertise and IP until further progress is demonstrated,” Jonas said.

“Further, Aptiv may not realize its targeted above-market growth and its backlog may not materialize into revenues. Ultimately the company is exposed to auto industry production and could be affected by a myriad of manufacturing issues as well as a loss of market share in AV/EV leadership to other competitors.”

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