Sensata Technologies Faces Challenges Navigating EV Headwinds, Goldman Sachs Analyst Warns

Goldman Sachs analyst Mark Delaney downgraded Sensata Technologies Holding Plc ST to Neutral from Buy, lowering the price forecast to $36 from $44.

Delaney projects slower near to intermediate-term revenue growth in its North American auto business tied to EVs due to weaker near-term EV sales and some traditional OEMs delaying certain EV launches. 

Sensata has about 1.5X the content on a battery electric vehicle vs. an internal combustion engine vehicle in North America, compared to 0.5X in Europe and 1.25X in China.

Sensata noted that in China, it tends to have about 50% lower average content on domestic brands compared to multinationals. 

Based on IHS data, production for multinationals in China will decline in volume year over year by low to mid-single digits in 2024 and 2025 compared to overall China production up 2% and 3% respectively, the analyst adds.

Recently, Ford Motor Company F announced that it is delaying production of its 3-row SUV EV from 2025 to 2027, and its new EV pickup from late 2025 into 2026. The analyst sees this as both risk and uncertainty for suppliers such as Sensata. 

Sensata's margins have trended lower over time, partly on higher EV mix and partly due to cost/FX, Delaney notes.

The analyst predicts the stock to continue to trade at a lower multiple while fundamentals are being pressured.

Per Delaney, there are modest downsides to Street estimates, and the company would need to be closer to an acceleration in fundamentals before the stock may outperform. 

However, the analyst sees a potentially high ceiling longer-term for Sensata shares given the strong electrification-related bookings from recent years, and its content opportunity is attractive for plug-in hybrids.

Price Action: ST shares are trading higher by 1.23% to $36.33 on the last check Tuesday.

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