Aptiv PLC (NYSE:APTV) stock is down nearly 24% year-to-date. Specifically, APTV shares dropped nearly 8% on June 26, soon after automaker Volkswagen (OTC:VWAGY) announced a phased $5 billion investment in Rivian Automotive (NASDAQ:RIVN). The reason? Analysts believe the partnership will hurt Aptiv’s moat and competitive position in the electric vehicle (EV) market.
Aptiv offers advanced technologies and innovative solutions for powering active safety, autonomous vehicles, smart cities, and connectivity. The Irish-American company claims to be the only company that provides an integrated vehicle brain and nervous system.
Here’s How Aptiv Could be Impacted
Aptiv is a core electrical infrastructure provider company. Following the Rivian-Volkswagen announcement, Piper Sandler analyst Alexander Potter downgraded the stock to a Sell rating from Hold. Potter also slashed the price target from $78 to $63, implying nearly 8% downside potential from current levels.
The five-star analyst has a success rate of 68% on his recommendations on APTV stock with an impressive average return per rating of 22.09%.
According to Potter, the deal between the two automakers to produce in-house electrical architecture and EV software poses a direct threat to companies such as Aptiv. Furthermore, the analyst noted that this is a “red flag” for Aptiv as more and more companies could follow suit and begin developing in-house technologies and software.
Potter also cited that Aptiv recently faced a massive cancellation of its SVA (Smart Vehicle Architecture) order from an unnamed customer, which also points to a strategic shift toward in-house manufacturing. Plus, the ongoing pricing pressures could hamper its ability to meet growth and margin targets.
Aptiv: Bulls vs. Bears
TipRanks Stock Analysis tool Bulls Say, Bears Say indicates that one of the strengths of APTV stock is the company’s focus on regular share buybacks. Bulls also highlighted Aptiv’s solid balance sheet and cash flow-generating ability that is attracting shareholders. In Q1 FY24, the company doubled the share buyback guidance to $1.5 billion.
On the other side, Bears noted the company’s weak guidance and the cancellation of a key order.
Meanwhile, hedge funds and retail Stock Investors are currently Very Positive on APTV stock as they possibly see the current dip as a buying opportunity.
Is APTV a Good Stock to Buy?
Analysts remain divided on Aptiv’s stock trajectory. On TipRanks, APTV shares have a Moderate Buy consensus rating based on eight Buys, two Holds, and one Sell rating. The average Aptiv price target of $102.33 implies 49.5% upside potential from current levels.
Ending Thoughts
According to Piper Sandler analyst, Aptiv stock is poised for further decline. Headwinds from newer entrants into the electrical infrastructure market could hamper Aptiv’s growth potential and margin targets. Consequently, the analyst downgraded the stock to Sell rating and slashed the price target.
