Autoliv Downgraded By Wells Fargo After Veoneer Spinoff

Autoliv Inc. ALV’s spinoff of Veoneer Inc VNE has drawn conflicting reactions from Street experts.

In the last month, Morgan Stanley introduced a price target implying 38-percent upside; BMO dropped its target from $180 to $119; UBS and Daiwa Capital became more bullish; and on Tuesday, Wells Fargo downgraded the stock. 

The Rating

Wells Fargo analyst Richard Kwas downgraded Autoliv from Outperform to Market Perform and cut the price target from $176 to $115.

The Thesis

Wells Fargo increased its 2018 and 2019 bottom-line forecast to reflect the Veoneer spinoff’s impact, Kwas said in the downgrade note. (See the analyst's track record here.) 

“We think improved free cash flow conversion and balance sheet deleveraging ultimately could benefit the stock’s multiple,” the analyst said. 

Although Kwas said he considers Autoliv’s targets achievable, he expects proof of progress and demonstration of management’s delivery pace to take time. Consequently, the next six to 12 months are not seen to offer enough upside potential to merit a buy recommendation, he said. 

Wells Fargo nonetheless anticipates "modest potential" for target outperformance.

Price Action

Autoliv shares were trading up 2.53 percent to $51.07 at the time of publication Wednesday. 

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Photo courtesy of Autoliv.