Strategic Action At Visteon Is Unlikely, Morgan Stanley Says In Double Downgrade

Shares of auto supplier Visteon Corp VC were hit with a double downgrade from Morgan Stanley Thursday. The stock was down more than 4 percent at the close Friday. 

The Analyst

Morgan Stanley downgraded Visteon from Overweight to Underweight and lowered the price target from $123 to $110.

The Thesis

Morgan Stanley's pessimistic expectations for Visteon are due to a less constructive view on the value of instrument and infotainment centers in vehicle architectures, according to the firm's report. 

Strategic action is unlikely in the near-term, given Visteon's consistent pattern of insider selling and low insider ownership.

Morgan Stanley is not projecting the same back-end-loaded growth that Visteon has implied for 2021.  

Like Harman, which was acquired by SAMSUNG ELECTRONIC SSNNF in March 2017, Visteon could be an acquisition candidate for a buyer looking to access strong relationships with auto manufacturers, according to Morgan Stanley.

The sell-side firm's reduced $110 price target is based on 8.5 times 2019 EV/EBITDA, down from an earlier multiple of 9.5 times.

Visteon does have upside risks if the company secures strong business wins, if the auto supplier gives investors confidence in the achievability of its 2021 guidance or if the company is acquired, according to Morgan Stanley. 

The Price Action

Visteon shares are up over 19 percent over the past year.

The stock ended Friday's session down 4.13 percent at $108.76 after losing more than 6 percent the prior day. 

Related Links:

Which Is A Better Investment: Automakers, Auto Suppliers Or Car Parts/Service Providers?

Delphi's Spinoff Upside Already Priced In?

Photo courtesy of Visteon.