Morgan Stanley Remains Bearish On Aptiv While KeyBanc Says Stock Is A 'Core Holding'

Auto parts maker Aptiv PLC APTV reported fourth-quarter results that came in better than expected but at least one Street analyst continues to see downside potential for the stock while others are making the case for upside.

The Analysts

Morgan Stanley's Armintas Sinkevicius maintains an Underweight rating on Aptiv with a price target lifted from $69 to $70.

KeyBanc Capital Markets' James Picariello maintains at Overweight, unchanged $95 price target.

Morgan Stanley: Valuation Concerns Unchanged

Aptiv earned $1.34 per share in the fourth quarter, which came in better than expected but management's first-quarter guidance at the midpoint was worse than expected, Sinkevicius said in a research report. However, the guidance "de-risks" 2019 and investors should appreciate the "more conservative approach" for the full year.

The company's status as being a best in class auto parts maker with favorable exposure to autonomous and electric vehicles remains unchanged, the analyst wrote. However, the auto cycle is likely in its late stages but investors have a "blind spot" when it comes to the stock especially after a 35 percent rebound off its 52 week lows in December.

KeyBanc: Attributes Of A 'Core Holding'

Aptiv's initial 2019 guidance suggests a 2.5-percent production decline of light vehicle (LV) production, Picariello said in a research report. The company's business in China was also guided to be down by a low double digit in the first half of 2019 and end the year down 8 percent.

However, the company's bookings support China out-growth of 8 percent to 10 percent and suggests the company has a "particularly strong handle on current headwind forces" in the country. In fact, the company is among the best positioned to see notable growth in China over the long-term.

Looking forward to 2019, the company is off to a good start with record bookings, expectations for a "solid" $1 billion free cash flow, and likelihood for re-acceleration of growth in 2020 implies the stock boasts "core holding" attributes

Price Action

Shares of Aptiv closed Friday at $78.02.

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