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Play Strong Auto Sales Without Buying Car Stocks

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Play Strong Auto Sales Without Buying Car Stocks

The strong auto sales for the month of February bodes well for Sirius XM Holdings Inc. (NASDAQ: SIRI), Visteon Corp (NYSE: VC) and Tower International Inc (NYSE: TOWR).

Auto sales in the United States have been healthier this year, with consumer demand for new vehicles strengthening. Companies such as Sirius should benefit from this trend, as they would be getting more orders for their receivers.

Related Link: Ford, American Axle And Penske Are Best Bets Ahead Of Auto Numbers

Analysts' Take

Buckingham analyst James Ratcliffe reiterated his Buy rating on SIRI shares and $5.00 target, implying 39 percent upside, as February auto sales support his above guidance subscriber forecast.

The analyst raised his first quarter auto sales estimate to 4.1 million from 4.0 million, while 2016 forecast remains unchanged at 17.6 million.

Meanwhile, more car sales mean more revenue for auto parts makers such as Visteon and Tower International. FBR analyst Christopher Van Horn said while results at the suppliers are typically based on production levels, monthly sales can give confidence in current production expectations.

Horn noted that Visteon and Tower International have significant business penetration on platforms that are seeing high consumer demand. For instance, both are leveraged to F-Series and Explorer.

"ATPs for these vehicles performed meaningfully better than the industry average, implying stronger demand that could encourage robust production rates to continue (positive for TOWR) and also implying further increase in cockpit technology demand (positive for VC) going forward. We also point to solid growth from Lincoln (+20 percent) as a positive for VC, which has exposure to the brand," Horn said in a note to clients.

Sirius XM closed Wednesday up 1.46 on the day at $3.82; Visteon was down 1.16 percent at $71.46; Tower was up 0.68 percent at $22.30.

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Latest Ratings for SIRI

DateFirmActionFromTo
Oct 2019Initiates Coverage OnHold
Sep 2019Initiates Coverage OnOutperform
Jun 2019UpgradesNeutralOutperform

View More Analyst Ratings for SIRI
View the Latest Analyst Ratings

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