With Delphi Splitting In Two, Morgan Stanley Says One Stock Is Worth Buying

Not all Delphi shares are created equal.

Delphi Automotive recently split its business and stock into Aptiv plc APTV and Delphi Technologies PLC DLPH, and the units earned distinct recommendations.

The Rating

Morgan Stanley analyst Adam Jonas initiated coverage on Delphi Technologies with an Overweight rating and $57 price target and on Aptiv with an Underweight rating and $64 price target.

The Thesis

DLPH represents the firm’s spun-off powertrain segment while APTV encompasses its electrical architecture and electronics lines.

Morgan Stanley anticipates a delay in electric vehicle penetration that could boost business for internal combustion engines, to which Delphi Technologies is exposed. Even with a surge in EV adoption, Delphi is poised to profit through its power electronics, Jonas said. (See Jonas' track record here.) 

APTV faces risk in the pace of market growth, in spite of its strong management team and “best in class portfolio” for autonomous vehicles, the analyst said. 

“DLPH could benefit from extended life for Auto 1.0 or consolidation, while we are concerned with investor positioning at APTV, and see risk to numbers from a downturn in the cycle, competition from new entrants, and insourcing by the OEMs,” Jonas said. 

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Photo courtesy of Aptiv.