Aptiv's Growth Trajectory Hits Speed Bump: Morgan Stanley Lowers Forecast

Aptiv PLC APTV shares are trading lower after Morgan Stanley downgraded the stock to Underweight (from Equal-Weight) and lowered its price target to $74 (from $90).

Analyst Adam Jonas re-rated the stock following fourth-quarter FY23 results. Last month, the company reported fourth-quarter fiscal 2023 net sales growth of 6% year-over-year, $4.92 billion, missing the consensus of $5.07 billion, while adjusted EPS of $1.40 beat the consensus of $1.33.

Aptiv sees FY24 net sales of $21.3 billion-$21.9 billion versus the current consensus of $21.61 billion and Adjusted EPS of $5.55 – $6.05 versus the consensus of $5.78.

The analyst notes a slowdown in demand for EVs and legacy OEMs' willingness to make them, challenging the company's growth-over-market (GOM) assumption.

Notably, Aptiv projects a GOM of 6% to 8% (vs. earlier expectations of 8% to 10%). The analyst anticipates the midpoint of this growth rate to be attained in FY24 (partially led by non-repeat of fourth-quarter UAW strike impact) and projects GOM of 3%-4% thereafter.

Related: Automotive Technology Supplier Aptiv Warns On $180M Adverse Impact From UAW Strike; Stock Plunges

The analyst estimates long-term total revenue growth (2023 to 2030) of 4.8% (including underlying production growth) for Aptiv. 

Jonas expects FY24 Adj. EBIT margins peak at 11.4%, after that falling to 11% by 2026 vs. the company’s mid-decade target of 13% (vs. earlier outlook of 14%-14.5%). 

Price Action: APTV shares are down 3.09% at $81.59 on the last check Wednesday.