Oppenheimer: Electrification Will Galvanize Delphi, Drive Outperformance

Delphi Technologies PLC (NYSE: DLPH) has conceded 15 percent of its share value since Oppenheimer initiated coverage last month, but the analysts say things couldn’t get worse.

The Rating

Analysts Noah Kaye and Colin Rusch upgraded Delphi to Outperform and introduced a $53 price target.

The Thesis

Auto suppliers are suffering negative sentiment from trade risks, a peak U.S. seasonally adjusted annual rate, a decline in light-duty diesels and the disruption potential of electrification. But Delphi stands apart.

“In our view, fundamentals have not meaningfully deteriorated for Delphi and we are raising our estimates for FY18 organic and total sales growth,” Kaye and Rusch wrote in a note. “We expect Delphi to execute on bookings growth and self-help opportunities and, via its power electronics portfolio, participate in the growth of vehicle electrification.”

The firm has already won about $5 billion of lifetime bookings for a power electronics portfolio, and it’s positioned to capitalize on a doubling electric-vehicle market in China and growing EV markets in the U.S. and Europe.

“We expect Delphi to maintain bookings momentum and be opportunistic on M&A,” the analysts wrote.

While tariffs could stunt Delphi’s bottom line in the near term, Oppenheimer expects the firm to minimize costs by reconfiguring its supply chain.

Price Action

At time of publication, shares were trading down marginally at a rate of $44.67.

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