- Visteon Corp VC shares are down 6 percent year-to-date, declining steadily after reaching a high of $109.97 on June 9.
- Baird’s David Leiker initiated coverage of the company with an Outperform rating and a price target of $123.
- Leiker believes that the company is poised to benefit from secular growth in automotive electronics, market share gains, margin expansion and upside from M&A.
After emerging from bankruptcy in 2010, and going through several years of transformation, Visteon is now a “global pure play on automotive electronics,” analyst David Leiker wrote.
In the report Baird noted that the company appears well positioned to benefit from:
Secular growth in automotive electronics – This is estimated to be more than 7 percent per annum. Leiker expects Visteon’s revenue growth to track in-line with the market for the next 2-3 years.
Market share gains - “Developing new technologies and integrating electronics/displays/clusters/infotainment position Visteon to gain market share on new awards launching in 2018-2020; should accelerate revenue growth above 10%,” the analyst said.
Margin expansion – The company seems to have several opportunities for margin improvement, including improvement in the corporate cost structure, leveraging revenue growth and benefits from combining Visteon/JCI Electronics/Yanfeng Electronics.
M&A - Visteon has a robust financial position, with $500 million in net cash. Even after returning $2.5 billion to shareholders, the company would be able to undertake M&A activity actively, with an aim to strengthens or broaden its electronics or software portfolio. “This could add as much as $30-35/share to our mid-term target price,” the report stated.
“Over time, we believe this drives a higher valuation with mid-term returns to shareholders above 20%. Potential catalysts include new CEO, investor interaction with management and execution,” Leiker commented.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.