Evercore Reviews Global Auto Marketplace

In a new report, analysts at Evercore ISI looked at global auto suppliers and initiated coverage on several stocks in the space. Analysts also describe the crossroads at which the industry currently finds itself.

Crossroads

Analysts believe that the auto industry is currently being forced to adapt to a drastically different modern world. Powertrain and safety regulations are now a major part of design. Consumers are demanding innovation in technology and entertainment. Finally, the “electrification” of the auto industry is making major waves.

“We believe the winners will be OEMs and suppliers that differentiate and incorporate little bit of youthful imagination,” analysts explain in the report.

Key Points

According to Evercore, the best auto suppliers in upcoming years will be suppliers that are driven by secular growth, as opposed to suppliers whose growth is driven by production. Analysts see four key trends for auto suppliers in the next five years: autonomous safety, mobility and connectivity, powertrain and electrical.

Because of the power of these four trends, analysts believe that a wide range of price to earnings multiples are appropriate for names in the space depending on the varying amounts of trend exposure.

Evercore notes that progress in the space will likely be evolutionary rather than revolutionary, adding that, “like Rome, the driverless car will not be built in a day.”

Stock Picks

Evercore’s top U.S. auto supplier stock is Lear Corporation LEA. However, it also has Buy ratings on Delphi Automotive PLC DLPH, BorgWarner Inc. BWA and Tesla Motors Inc TSLA.