Piper Jaffray on Westport: Cummins' Guidance Cut No Reason for Concern
In the report, Piper Jaffray writes, "WPRT shares have responded negatively this afternoon to Cummins' guidance cut, but we view this as unjustified. We recommend adding to positions on weakness. Since WPRT and CMI maintain a JV that makes natural gas engines, investors often lump them together. However, we note that the rate of natural gas adoption is far more important to WPRT's fundamentals than growth in the underlying truck & machinery markets. To illustrate: CMI cited weakness in engine orders in China, the U.S., and other geographies, but if the rate of NG engine adoption is sufficiently rapid in these regions (which appears to be the case), WPRT could potentially increase sales volume by >2x over the next 1+ years even if the truck markets in these regions deteriorate further."
Piper Jaffray maintains its Overweight rating and $45.50 price target on Westport Innovations, which is currently trading down 5.44% from yesterday's $35.09 closing price.
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