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Investing.com - Morgan Stanley (NYSE:MS) downgraded Opmobility SE (OPM:FP) from Overweight to Underweight on Thursday, while raising its price target to EUR13.40 from EUR10.20.
The downgrade reflects Morgan Stanley’s concerns about Opmobility’s exposure to legacy internal combustion engine (ICE) products, which the firm believes presents significant obsolescence risks that could lead to increased R&D expenses beyond current guidance and consensus expectations.
Morgan Stanley noted that Opmobility operates at the low end of the EU auto parts margin range while maintaining high leverage, creating additional financial pressure as the company faces ongoing headwinds in its lighting business and increased dependence on developed market automotive sales.
The firm acknowledged that Opmobility’s fuel tank and C-Power emission systems provide some protection from Chinese competition, but emphasized these same ICE-focused products represent the company’s greatest long-term risk as the industry transitions to electric vehicles.
Morgan Stanley also pointed out that while Opmobility’s module business with new capacity should provide growth momentum, its lower margins will likely dilute the company’s overall profitability over time, contributing to the downgrade decision amid "limited catalysts and stretched valuation."
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