Baird raises Aptive stock to Outperform, price target to $82

On Monday, Baird analysts upgraded Aptive PLC (NYSE:APTV) stock rating from Neutral to Outperform, increasing the price target to $82 from $75. The upgrade follows a refined analysis post-announcement of the company's decision to spin off its Electrical Distribution Systems (EDS) business. Currently trading at $63.43 with a P/E ratio of 7x, the $14.9 billion market cap company appears undervalued according to InvestingPro analysis. Baird's assessment suggests that the spin-off could unlock over 15% of new estimated value.

The analysts believe that the new Aptive will benefit from higher growth and increased diversification. With annual revenue of $19.7 billion and a "GOOD" financial health rating from InvestingPro, the company's fundamentals support this outlook. The analysts note that the company's margin setup appears cleaner following recent improvements, and the current subdued sentiment towards the stock presents a more favorable risk/reward balance.

Aptive's strategic move to separate its EDS segment is seen as a key factor in revealing several aspects of fundamental value. This strategic shift is expected to position Aptive more attractively to investors looking for auto sector opportunities in the second half of 2025 and beyond.

According to Baird, the spin-off provides an opportunity for investors to engage with the stock early, capitalizing on both cyclical and fundamental catalysts. The analysts' commentary highlights the potential for Aptive to stand out in the market, particularly as investors begin to scout for automotive plays that could yield returns in the medium to long term.

In other recent news, Aptive PLC has announced significant strategic decisions, including the intent to spin off its Electrical Distribution Systems (EDS) business. This decision has been met with various reactions from financial analysts. UBS and Baird have both raised Aptive's price target to $82 and $75 respectively, while Piper Sandler upgraded the stock from Underweight to Neutral with a new target of $65. CFRA maintained a strong buy rating but adjusted the stock target to $85, and Oppenheimer maintained an Outperform rating with an $83 target.

In addition to the spin-off, Aptive's shareholders have approved a major corporate restructuring plan, including a merger and scheme of arrangement. The company has also decided to fully redeem €700 million of its Euro-Denominated Senior Notes due in 2025.

Despite a 6% drop in Q3 2024 revenue to $4.9 billion, Aptive saw an increase in earnings per share (EPS) to $1.83. The company revised its full-year revenue outlook to between $19.6 billion and $19.9 billion, with an operating margin of 11.9%, and lowered its adjusted full-year EPS estimates to $6.15. These are among the recent developments at Aptive PLC.

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