A 7% move on Friday
was enough to make shares of Aptiv (NYSE: APTV)
the best performer in the S&P 500 index and to give them their highest closing price since February. They’re now up more than 200% from the lows of Q1 and show no sign of slowing down as we round the corner into the last quarter of 2020.
The catalyst for Friday’s jump was an upgrade on the shares from Morgan Stanley, whose analyst Adam Jonas lifted his price target to $150 from $63, implying a 40% move higher from the session’s closing price. Straight 138% lifts in price targets don’t come around too often and Wall Street quickly took notice.
Only a week previous to this, Goldman Sachs was highlighting Aptiv as a key player in the electric vehicle space. In particular, they’re bullish on the company’s strong market position, its best in class connectors, and recent positive order momentum. With fighting talk like this, investors don’t need a whole lot more convincing to pile in.
On the longer term, it looks like things are finally coming back around for the $24 billion auto-tech company, headquartered in Dublin, Ireland. While shares have been rallying all summer, they’re still only just back to pre-COVID levels and are effectively flat over the past 3 years. July’s Q2 earnings report would surely have had investors getting nervous as revenue came in down 45% year on year while EPS was firmly in the red.
However, maybe it was the blow-off rally that was happening in tech at the time but it seems as if Wall Street took this in its stride and was happy to buy into the company’s longer-term potential. A week after the report, Credit Suisse maintained their Outperform rating on shares and went so far as to raise its price target.
It’s worth noting that Tesla (NASDAQ: TSLA) was just starting its 75% pop that came to define this summer’s exuberance. The additional attention in the electric vehicle space probably did the likes of Aptiv no harm at all and only served to increase the bull’s case.
Now with some fresh sell-side voices behind them, investors can look confidently towards the rest of 2020. Based on management's actions this year already, there’s plenty of moves that could be made. They’ve already raised more than $2 billion in equity capital this summer and many are expecting some M&A activity to start hitting the headlines in the form of bolt-on additions. The company is operating with already attractive margins that are expected to continue widening through 2022 which offers management a lot of runway in terms of revenue growth and profits.
It will be interesting to see how shares react before and after next month’s earnings report. There’s a good chance they’ll run up in anticipation and if the numbers are promising enough, it’s not hard to see them hitting $100. This is about where they’ve topped out in the past before turning back from triple digit status twice in the last two years.
The more negative technical investor might point towards the potential for an ugly triple top to form but the more positive investor will be happy to buy into the stock’s longer term growth potential. In recent years there has always been a steady supply of buyers whenever shares have dipped below the $60 mark and we’re seeing the latest run up off that level now.
Wall Street knows the electric vehicle market is going nowhere but up and auto-tech names like Aptiv are well-positioned to take advantage of it.
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