A Visteon HQ Visit Leaves BMO Feeling More Bullish On The Stock

Strong Bookings

Analyst Richard Carlson noted that Visteon has been booking business at a very high rate since CEO Sachin Lawande joined the company in June 2015, with many of the wins under Lawande still not a meaningful portion of the revenues currently.

The analyst expects bookings to remain well above the revenue run rate for the foreseeable future and revenue growth to accelerate in 2018/2019, likely ending the decade in double-digit territory as backlog converts to revenue. The analyst also sees EBIDTA growth, helped by a combination of higher-margin products being booked and continued internal initiatives.

Switching Valuation Methodology

BMO Capital Markets said it is making no adjustments to its model, with its 2017 as well as 2018 EBITDA estimates being in line with the consensus. However, the firm said it is switching its valuation methodology to EV/EBITDA from P/E and basing it on long-term targets.

Attractive Name In Auto Industry

"We also believe that the company's relatively low exposure to the US market, its sole focus on the fast-growing cockpit electronics sector where there's significant room for content growth, and self-help initiatives under way to drive margin improvement, makes it one of the most attractive names in auto today," the firm concluded.

As such, the firm upgraded shares of Visteon from Market Perform to Outperform and raised its price target from $104 to $115.

Which Is A Better Investment: Automakers, Auto Suppliers Or Car Parts/Service Providers? Automakers Shift Lanes As Disruptive Technologies Take Over _______ Image Credit: By Visteon Corp. (Eigene Vektorisierung) [Public domain], via Wikimedia Commons