TE Connectivity's Peers Have More Upside, According To Goldman Sachs

Goldman Sachs’ Mark Delaney mentioned that TE Connectivity Ltd TEL shares have declined 5.5 percent since September 2015, as compared to the 9 percent decline among its peers and 3 percent rise in the S&P.

Delaney downgraded the rating on the company to Neutral, while maintaining the price target at $66.

The analyst pointed out that the decline in the share price was solely due to multiple compression, driven by investor concerns regarding the auto cycle.

The Positives

“While we still see long-term value in TEL driven by increasing content, we see greater upside to other stocks in our coverage,” Delaney stated.

The analyst believes that TE Connectivity is well positioned to grow sensor and connector content in industrial and autos.

Also, while the company has “limited sensor revenue in light vehicles,” Delaney believes that TE Connectivity would be able to “cross-sell sensor products with its connectors for cars in the longer-term.”

In addition, “key cyclical indicators such as the connector confidence index are positive,” the analyst noted.

Less Positive Near Term

However, Delaney also pointed out that there were some issues that were less positive for the near term, such as the higher than seasonal quarter on quarter guidance for 4QFY16 sales, uncertainty regarding “earnings stripping regulation,” and the completion of the accelerated BNS buybacks.

“We remain constructive on the auto cycle, although there was a slight