Labor Negotiations and Potential Strikes in the Auto Sector
Labor negotiations and potential strikes in the auto sector may impact stock prices, but present investment opportunities. Aptiv, BorgWarner, and Mobileye are driving trends in vehicle electrification and self-driving cars.
Troy D. Hanson
September 13, 2023
Labor negotiations between the ‘Detroit Three’ auto makers and the United Auto Workers are currently causing uncertainty in the industry. With a strike looming, investors may be concerned about the impact on auto parts makers. However, according to UBS analyst Joseph Spak, this potential strike has already been factored into stock prices.
Spak notes that even if a strike does occur, it will be temporary and should not significantly impact stock prices. He believes that the lost volume during a strike is a transient issue, which means that there may be attractive entry points for investors.
It is worth considering the impact of previous strikes on companies like Aptiv. During a 40-day strike against GM in 2019, Aptiv experienced an estimated loss of $200 million in sales. However, this only accounted for around 0.03% of their annual sales per day. Additionally, Aptiv's operating profit also suffered, losing approximately $110 million, which equated to about 0.1% of their full-year total each day.
Based on these reference points, if there were to be a 10-day strike against all three auto makers, Aptiv might face a 3% reduction in their projected 2023 operating profit of roughly $2.2 billion. It's important to note that this money would primarily be shifted into future quarters rather than being lost forever.
Taking these factors into consideration, Spak rates shares of Aptiv (ticker: APTV), BorgWarner (BWA), and Mobileye (MBLY) as Buy. Over the past two months, these stocks have experienced declines of about 8%, 12%, and 18%, respectively, as investors show concern over labor issues in the auto sector.
The Future of Automotive Stocks
As the automotive industry continues to evolve, three companies are standing out as key players in the shift towards vehicle electrification and self-driving cars. Aptiv, BorgWarner, and Mobileye are all driving trends in these areas with their innovative solutions.
Aptiv is at the forefront of the electric vehicle revolution, providing both parts and software for this growing market. Their offerings cater to traditional vehicles as well as the emerging electric vehicle segment.
BorgWarner specializes in powertrain parts for both traditional and electric vehicles. As the demand for electric vehicles continues to rise, BorgWarner's role in providing essential components is crucial to the industry's success.
Mobileye focuses on self-driving technology, offering cutting-edge systems that enable cars to drive autonomously. Their advanced solutions are paving the way for a future where self-driving cars are a common sight on the roads.
The Future Outlook
Analyst Sam Spak predicts significant growth in the battery-powered car market. He foresees that global sales of battery electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs) will surpass gasoline-powered vehicle sales by the end of this decade. This projection amounts to approximately 45 million units each for BEVs, PHEVs, and gasoline-powered cars. In contrast, BEV and PHEV sales totaled only about 10 million units combined in 2022, while gas-powered sales reached around 72 million units.
Spak is also optimistic about the increasing adoption of advanced driver-assistance features. He anticipates a 60% annual growth rate in this technology market between 2023 and 2030.
Stock Performance and Recommendations
Aptiv's stock is currently trading at $102.87 per share, showing a 0.2% increase during premarket trading. Meanwhile, the S&P 500 and Dow Jones Industrial Average futures are experiencing a slight downturn of about 0.1%. Spak's price target for Aptiv is set at $143 per share. Analysts largely support Aptiv, with approximately 78% of them rating the company's shares as a Buy. This is significantly higher than the average Buy-rating ratio of about 55% for S&P 500 stocks. The average analyst price target for Aptiv is around $129 per share.
BorgWarner's stock is currently valued at $41.50 per share, reflecting a 0.4% increase. Spak's price target for BorgWarner stands at $52 per share. Around 65% of analysts covering the company view BorgWarner's shares as a Buy, aligning with the average analyst price target of approximately $52 per share.
Mobileye's stock is currently trading at $35.65 per share, indicating a 0.5% increase. Spak has set a price target of $48 per share for Mobileye. An overwhelming majority of analysts, about 86%, rate Mobileye's shares as a Buy, with the average analyst price target also set at $48 per share.
As the automotive industry continues to transform, these companies are well-positioned to thrive in the growing markets of electric vehicles and self-driving technology. The future looks promising for Aptiv, BorgWarner, and Mobileye.