Company Reports

We maintain our $69 fair value estimate for shares of narrow-moat Sensata Technologies after positive first-quarter results and second-quarter guidance leave our long-term thesis intact. Sensata’s second-quarter guidance was above our model, but its updated full-year expectations align with our forecast. Sensata also announced the retirement of its current CEO and that activist investor Elliott Management has gained a board seat. Shares soared 17% following the release, which we attribute to positive expectations for new leadership. We continue to see shares as undervalued. We’re optimistic that a new CEO can unlock shareholder value via better execution and strategic focus. Sensata is well-positioned to capitalize on long-term automotive electrification, in our view, and we believe a new CEO and activist influence will drive a more concentrated focus on this opportunity.

We maintain our $69 fair value estimate for shares of narrow-moat Sensata Technologies after it reported fourth-quarter results and gave an outlook for 2024 that both matched our expectations. Sensata continues to deal with softer end market demand that has weighed on results in the past two years and appears set to continue through 2024. Despite short-term challenges, we continue to like the firm’s focus on electrification and expect this to contribute to higher growth in the long run. With this long-term view, we continue to see significant upside for investors with a longer time horizon. We don’t see catalysts to the stock in 2024 but expect a positive inflection in 2025 and 2026 when the firm’s electrification business wins contribute more meaningfully to revenue.

We think Sensata Technologies is a differentiated supplier of sensors and electrical protection, predominantly for the automotive market. The firm has oriented itself to benefit from secular trends toward electrification, efficiency, and connectivity. Despite the cyclical nature of the automotive and heavy vehicle markets, electric vehicles and stricter emissions regulations provide Sensata the opportunity to sell into new sockets, which has allowed the firm to outpace underlying vehicle production growth by about 4% historically. We think such outperformance is achievable over the next 10 years, given our expectations for a fleet mix shift toward EVs and Sensata’s growing addressable content in higher-voltage vehicles.

We think Sensata Technologies is a differentiated supplier of sensors and electrical protection, predominantly for the automotive market. The firm has oriented itself to benefit from secular trends toward electrification, efficiency, and connectivity. Despite the cyclical nature of the automotive and heavy vehicle markets, electric vehicles and stricter emissions regulations provide Sensata the opportunity to sell into new sockets, which has allowed the firm to outpace underlying vehicle production growth by about 4% historically. We think such outperformance is achievable over the next 10 years, given our expectations for a fleet mix shift toward EVs and Sensata’s growing addressable content in higher-voltage vehicles.

We trim our fair value estimate for shares of narrow-moat Sensata Technologies to $69, from $71, to reflect a weaker fourth-quarter guide and expectations for a soft 2024. Sensata's fourth-quarter guidance missed our expectations due to a higher impact management is baking in from ongoing worker strikes at US automakers. We also anticipate soft industrial markets to persist into 2024, along with moderating automotive growth overall. Still, we see shares as deeply undervalued. We continue to think the market is missing Sensata's long-term opportunity in electrification, its design win momentum to this end, and its resulting growth potential over the next five years.

We maintain our $71 fair value estimate for shares of narrow-moat Sensata Technologies after its 2023 investor day reinforced our long-term bullishness on its growth opportunities within electrification. Sensata set forth impressive financial targets for 2026, including high-single-digit sales growth that aligns with our model. The firm also raised its long-term target margin range—toward which we hold mild skepticism—but we view the focus on profitability positively. Sensata also announced restructuring efforts to improve profits in the short term against struggling end markets. We continue to see shares as significantly undervalued for long-term investors. We believe the market is underappreciating Sensata's strong opportunity within electrical protection for autos and heavy vehicles and we look for higher growth over the next three years to drive up the stock.

In 2022, battery electric vehicles represented nearly 10% of global auto sales, up from a little less than 6% in 2021. Much of the growth occurred in China, which has been a leader in EV sales over the past decade. However, with national EV subsidies in China expiring in 2022 and far lower sales in the U.S. and Europe, the market questions if EV sales can continue to grow without subsides.

We maintain our $71 fair value estimate for Sensata Technologies' shares after second-quarter results showed the firm continuing to work its way through bumpy end market conditions. Sensata’s sales exceeded our expectations, but guidance for the third quarter missed our model. The firm continues to deal with headwinds like inventory destocking at customers and foreign exchange headwinds as well as soft industrial demand. End markets look choppier for 2023 than previously expected, but in the long term we see the firm as a major beneficiary of electrification. Its design activity over the past three years will pave the way for strong growth in 2024 and beyond, in our view. We continue to see shares as cheap for a narrow-moat company with appealing growth and profitability prospects. Shares dropped 8% on weak guidance, but we think the market is not focusing enough on long-term opportunity.

We are maintaining our $71 fair value estimate for narrow-moat Sensata Technologies after the company reported first-quarter results slightly exceeding our revenue expectations. Despite continued headwinds from supply chain constraints, foreign exchange impacts, and inflation, we are pleased with Sensata’s ability to remain on track to meet its long-term targets. Our long-term thesis maintains that Sensata will be a beneficiary from secular growth in electric vehicles through its market outperformance in electrification. Positively, the firm reaffirmed its goal of $2 billion in electrification revenue by 2026 as battery electric vehicle content expands, an estimate that we view as achievable and paramount to Sensata’s success. Shares sold off after the release, falling more than the broader market, in our view due in part to tempered short-term profitability commentary that doesn’t worry us. We see shares as attractive.

We maintain our $71 fair value estimate for narrow-moat Sensata Technologies after the firm reported solid fourth-quarter results and provided positive longer-term commentary. We are impressed with the firm’s ability to navigate supply chain disruptions, foreign exchange headwinds, and component cost inflation, with strong fourth-quarter profitability. We believe Sensata is executing on its long-term strategy to drive growth from the electric vehicle transition with strong design win activity and electrification growth. Management also eliminated its inorganic growth target, preferring to focus on organic opportunities. We view this positively, reflecting the traction Sensata is building in electric and connected vehicles with its existing portfolio. We hold our long-term thesis that Sensata is well positioned for this endeavor and see shares as undervalued even after jumping 10% with results.

We think Sensata Technologies is a differentiated supplier of sensors and electrical protection, predominantly for the automotive market. The firm has oriented itself to benefit from secular trends toward electrification, efficiency, and connectivity. Despite the cyclical nature of the automotive and heavy vehicle markets, electric vehicles and stricter emissions regulations provide Sensata the opportunity to sell into new sockets, which has allowed the firm to outpace underlying vehicle production growth by about 4% historically. We think such outperformance is achievable over the next 10 years, given our expectations for a fleet mix shift toward EVs and Sensata’s growing addressable content in higher-voltage vehicles.

We are maintaining our $71 fair value estimate for narrow-moat Sensata Technologies after the company reported third-quarter results at the high end of guidance and above our expectations. We believe that the firm is on track to reach its full-year targets and are impressed by its ability to navigate supply chain challenges, foreign-exchange headwinds, and component cost inflation thus far. We believe the headwinds are transitory in nature, as observed with some macro factors improving this quarter, and view the shares as undervalued and attractive to long-term investors. We hold our long-term thesis that Sensata is well positioned to achieve substantial growth against the backdrop of accelerated electric vehicle production.

We think Sensata Technologies is a differentiated supplier of sensors and electrical protection, predominantly for the automotive market. The firm has oriented itself to benefit from secular trends toward electrification, efficiency, and connectivity, and we think that investors will see meaningful top- and bottom-line growth as indicative of an automotive market recovery.

We are lowering our fair value estimate for narrow-moat Sensata Technologies to $71 from $75 after the company’s second-quarter results missed our revenue and profitability expectations and it lowered its full year guidance. The second half stands to be impacted by continued supply chain challenges, foreign exchange headwinds, and component cost inflation. While we anticipate macroeconomic headwinds to persist through 2022, we view shares as undervalued and attractive to long-term investors. We believe that the current headwinds Sensata faces are short-term in nature, and do not supersede our long-term thesis for growth from high-voltage electric vehicle applications.

We think Sensata Technologies is a differentiated supplier of sensors and electrical protection, predominantly for the automotive market. The firm has oriented itself to benefit from secular trends toward electrification, efficiency, and connectivity, and we think that investors will see meaningful top- and bottom-line growth as upon an automotive market recovery.

Sensata Technologies’ first-quarter results and management commentary left us unimpressed but didn’t change our bullishness on its long-term prospects in electrification. We maintain our fair value estimate of $75 per share. We think Sensata continues to ride out residual weakness in the automotive market but think its fundamental long-term demand looks healthy. We continue to believe the market is undervaluing Sensata’s opportunity as a differentiated and sticky supplier, which underpins our narrow economic moat rating and growth forecast for the firm. We also think investors will welcome Sensata’s initiation of a quarterly dividend beginning in May. We view shares as attractive for long-term investors.

We’re maintaining our $75 fair value estimate for Sensata Technologies after the firm reported a strong quarter and provided guidance that aligns with our long-term view. We expect the vehicle markets that Sensata depends upon to rebound from supply constraints throughout 2022 and think its results will follow commensurately. We are particularly pleased to hear of the continued torrid growth coming out of the firm’s electrification megatrend, as a shift toward electric vehicles and higher-voltage applications across verticals is a key tenet of our long-term thesis for Sensata. We continue to view shares as undervalued and think the market isn’t fully appreciating Sensata’s opportunity in electrification or its consistent outperformance relative to its end markets.

We think Sensata Technologies is a differentiated supplier of sensors and electrical protection. The firm has oriented itself to benefit from secular trends toward electrification, efficiency, and connectivity, and we think that investors will see meaningful top- and bottom-line growth as upon an automotive market recovery.

We are maintaining our $75 fair value estimate for narrow-moat Sensata Technologies after the company reported strong third-quarter results and guided for a weaker fourth quarter. Sensata’s revenue and non-GAAP operating income came in mostly in line with our above-consensus expectations, and both metrics beat the top end of their respective guidance range. Nonetheless, management is guiding to a sequential decline in the fourth quarter behind lower-than-previously-expected automotive production stemming from ongoing supply challenges. Sensata’s performance is heavily tied to transportation end markets (74% of third-quarter sales), but, despite the short-term industry challenges, we remain bullish on its long-term prospects. We think vehicle electrification provides a long-term growth runway for Sensata and will lead to continued outperformance over underlying automotive and heavy vehicle production, regardless of the market backdrop. We continue to view shares as significantly undervalued and think the market will reward Sensata investors as supply constraints ease and market outperformance becomes more visible on the top line.

We consider shares of narrow-moat Sensata Technologies to be attractively priced, and we highlight it as one of our top picks. Sensata should continue to be a long-term beneficiary of greater content in electrified, autonomous, and connected vehicles. In the near term, the company has performed well in recent quarters, and we expect content growth to lead to outperformance over the automotive and heavy vehicle markets even amid ongoing supply constraints in 2021. We reiterate our $75 fair value estimate.