Delphi Automotive PLC DLPH has significant exposure to all major growth themes in the auto industry, Piper Jaffray’s Alexander E. Potter said in a report. The analyst initiated coverage of the company with an Overweight rating and a price target of $82.
“We aren't alone almost every analyst who covers DLPH thinks it's a "Buy" but it's hard to deny the quality of the Delphi thesis,” analyst Alexander Potter wrote.
Double Digit Earnings Growth
Delphi has meaningful exposure to the major growth themes in the auto industry, like telematics/infotainment, self-driving vehicles and electrification. Moreover, the company is poised for margin expansion and double-digit EPS growth. Despite these positives, the stock is trading near its lowest multiple in three years, Potter noted.
While expressing concern regarding macro risks, the analyst pointed out that decelerating US auto sales “shouldn't get so much air time.” He elaborated that the US contributes only 37 percent of Delphi’s revenue, while China and Europe, which together contribute 54 percent of Delphi’s revenue, have good growth prospects.
“The valuation is reasonably low, and absent a worldwide recession, the company seems likely to achieve double-digit earnings expansion for the next couple years. DLPH has above-average margins and a mid/high-20s ROIC, all with a low-risk balance sheet and a reliably growing dividend (not to mention frequent buy-backs),” Potter stated.
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