Goldman Sachs took a deep dive into the U.S. auto industry, initiating coverage on 10 auto manufacturers and suppliers Tuesday.
The Auto Analyst
Mark Delaney issued the following auto stock ratings:
- Tesla Inc TSLA initiated at Buy with an $864 price target.
- Aptiv PLC APTV initiated at Buy with a $70 price target.
- Gentex Corporation GNTX initiated at Sell with a $19 price target.
- Visteon Corp VC initiated at Sell with a $41 price target.
- Ford Motor Company F initiated at Neutral.
- General Motors Company GM initiated at Neutral.
- Magna International Inc. MGA initiated at Neutral.
- Lear Corporation LEA initiated at Neutral.
- Delphi Technologies PLC DLPH initiated at Neutral.
- BorgWarner Inc. BWA initiated at Neutral.
The Auto Thesis
In the initiation note, Delaney said 2020 will be very challenging for the auto industry given COVID-19 supply and demand disruptions. (See his track record here.)
Goldman is predicting global auto sales will decline 17% in 2020 and U.S. light vehicle sales will drop 30%. The firm is anticipating those U.S. light vehicle sales will bounce back with 25% growth in 2021.
Unfortunately, even with Goldman’s auto coverage group down an average of 30% since late January, Delaney said there could be more downside in the near-term given the uncertainty of the pandemic.
But Delaney said there is good news for auto investors as well.
“Importantly, based on our deep dive work on past cycles, balance sheets, and cash flows, we believe that the companies in our autos coverage are significantly better positioned to weather this current downturn than the one in 2008/2009 (even though we would not currently be buying stocks in the group broadly given the uncertainty about how long the current sharp economic slowdown will last),” the analyst said.
Goldman is most bullish on the EV market and recommends EV leader Tesla and its suppliers as top picks, including Aptiv.
Like most other industries, the auto industry is a mess at the moment. It’s unlikely many customers will be buying cars anytime soon, so the key questions for investors is how long will the downturn last and which companies are best-positioned to weather the slump.
Do you agree with this take? Email firstname.lastname@example.org with your thoughts.
Photo courtesy of Tesla.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.