Intel stock extends gains after report of possible U.S. government stake
On Monday, JPMorgan updated its outlook on TE Connectivity (NYSE:TEL), adjusting the price target to $180.00 from the previous $169.00 while maintaining a Neutral rating on the stock. The firm noted that TE Connectivity's shares have seen a modest year-to-date increase of 7%, underperforming the broader market's 15% gain. The restrained investor sentiment towards the stock was attributed to several factors, despite the company's valuation multiple being close to its long-term average.
The analyst pointed out that the downward pressure on TE Connectivity's shares is due to a declining auto production outlook, with the 2024 production estimate reduced by 1.6 million units over the last 90 days.
Additionally, a declining commercial transportation market and an industrial outlook that has stabilized but shows no significant signs of recovery are contributing factors. The potential impact of a higher tax rate on the company is also yet to be quantified.
The report further highlighted that while the outlook for TE Connectivity's Communication Solutions segment is positive, with revenue in the AI connectors market expected to double from $700 million in 2024 to approximately $1.4 billion in 2025, the company is still perceived as a smaller player compared to its peer, Amphenol (NYSE:APH), in this end-market.
JPMorgan anticipates that TE Connectivity's third-quarter results and fourth-quarter guidance will align with consensus expectations, with limited upside as the macroeconomic backdrop remains challenging.
Despite the company's cost-cutting measures, which could lead to strong margins upon volume recovery in 2025, JPMorgan's forecasts for fiscal year 2025 remain cautious due to potential incremental headwinds to revenue growth.
The new price target for December 2025 is based on a 20x price-to-earnings ratio applied to the firm's fiscal year 2026 earnings per share estimates. This adjustment reflects a forward-looking valuation as JPMorgan sets its sights on the company's performance beyond the current fiscal year.
In other recent news, TE Connectivity has been the focus of several analyst updates. Jefferies has raised the company's share target from $180.00 to $190.00, anticipating strong earnings for the third quarter of fiscal year 2024. This outlook is influenced by recent adjustments in global automotive forecasts and expected recovery in the demand for Industrial Equipment.
BofA Securities also increased its price target for TE Connectivity to $170, citing the company's ability to grow its content per vehicle and maintain overall growth. The firm anticipates TE Connectivity to report revenues of $4.0 billion and earnings per share of $1.85 for the fiscal third quarter.
On the other hand, Baird adjusted its price target down to $162, anticipating a quarter similar to the previous one, where TE Connectivity met expectations but issued lower forward guidance.
Evercore ISI maintained an Outperform rating, suggesting that divesting TE Connectivity's medical business could benefit the company strategically. The firm later increased its price target to $175, citing growth prospects in AI and EV markets.
These are recent developments for TE Connectivity, with analysts from Jefferies, BofA Securities, Baird, and Evercore ISI providing their projections.
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