Attention Investors: BorgWarner Downgraded At Morgan Stanley

• BorgWarner Inc. BWA shares have been declining steadily for the last six months and are down 28 percent since April 20.
• Morgan Stanley’s Adam Jonas downgraded the rating on the company from Overweight to Underweight, while reducing the price target from $68 to $37.
• Long-term challenges to internal combustion technology, competition from active safety and potentially lower growth at the company’s largest customer are the concern areas, Jonas noted.

Analyst Adam Jonas said that BorgWarner faces several challenges in the near future, especially due to the impact of lower fuel prices on internal combustion technology and “competition from active safety and improved EV economics from shared mobility.”

BorgWarner’s future growth and profitability are likely to be hit by potentially lower growth at the company’s biggest customer Volkswagen AG (ADR) VLKAY, Jonas mentioned, while adding that the VW emissions situation may even pose a challenge to the growth sustainability of internal combustion technology.

Other factors that are expected to adversely impact BorgWarner’s growth include low fuel prices, competition from the new active safety software and an improvement in the cost structure performance of EVs, the Morgan Stanley report mentioned.

“We have long positioned BWA as an automotive technology company aimed at improving fuel economy and performance of the world's internal combustion fleet, benefitting from higher fuel prices and its high exposure to the German auto industry,” the analyst wrote.

Jonas believes that BorgWarner’s stock should be cheaper “given the moving pieces in the fundamental environment impacting the earnings.”