Aptiv PLC: Market-Trouncing Backbone to EV Industry Has Lots of Room to Run

Aptiv PLC: Market-Trouncing Backbone to EV Industry Has Lots of Room to Run

Undervalued APTV Stock Poised to Rip Higher

There’s more to the electric vehicle (EV) industry than the flashy, limelight-hogging automakers. Some of the most interesting EV-related companies are the ones that support the automakers, including those that make batteries and car-charging stations.

Then there are under-the-radar EV companies like Aptiv PLC (NYSE:APTV), which designs, manufactures, and sells vehicle components around the world.

To be fair, a company with a market cap of $43.9 billion and approximately 50 hedge funds as shareholders is hardly “under the radar,” but it is in the sense that few people associate Aptiv PLC with the EV industry.

Also known as an artificial intelligence company, Aptiv develops safer, greener, more connected technologies that seamlessly integrate vehicles with their passengers and the wireless world. (Source: “Stewardship Outreach: November 2021,” Aptiv PLC, last accessed December 10, 2021.)

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The Dublin, Ireland-based company provides electronic and safety technologies that are the backbone of the global automotive market.

Aptiv’s Advanced Safety & User Experience segment is responsible for software-enabled solutions that “improve the safety, comfort and convenience of the vehicle, supported by core capabilities in advanced computing, connectivity, data management and analytics.” (Source: “Business Segments,” Aptiv PLC, last accessed December 10, 2021.)

The company’s Signal & Power segment provides the “high-speed data and high-power electrical systems required for feature-rich, highly-automated vehicles.”

Aptiv PLC Has Outperformed its Industry Since its IPO

Since its 2011 initial public offering (IPO), Aptiv has announced 15 strategic acquisitions, four divestitures, one joint venture, and one spin-off. (Source: “Stewardship Outreach: November 2021,” Aptiv PLC, op. cit.)

This has allowed the company to strengthen its position in the automotive connector market, exit low-growth commodity businesses, and enhance its automated driving and data management capabilities.

Aptiv has spun off its powertrain segment, increased its scale in engineered components, expanded its presence in adjacent markets, and established an autonomous driving joint venture with Hyundai Motor Company.

Aptiv PLC’s strengthening position in its industry is one big reason why Aptiv stock has been outperforming the broader stock market, its industry peers, and the S&P 500—not just in 2021, but since APTV stock’s 2011 IPO.

StocksShareholder Returns
January–November 2021
Shareholder Returns
Since Aptiv’s 2011 IPO
Aptiv PLC34.3%980%
Auto Sector Peers16.8296%
Industrial Sector Peers27.4%460%
S&P 50025.1%286%

(Source: Ibid.)

I’ve been following Aptiv PLC for a while now. I last wrote about the company more than a year ago.

In November 2020, Aptiv stock was trading near record levels at $98.32, essentially erasing all of its losses associated with the COVID-19 pandemic-fueled sell-off in March 2020.

Since then, consistently strong financial results and investor enthusiasm have propelled APTV stock considerably higher. Trading at $167.38 as of this writing, Aptiv stock is up by:

  • 70% since I wrote about Aptiv PLC in November 2020
  • 11% over the last three months
  • 28% year-to-date
  • 35% year-over-year

Despite its market-trumping gains, there’s still a lot of juice left in APTV stock.

Over the next 12 months, Wall Street analysts see upside for Aptiv stock between 18.7% and 30%. That might sound aggressive, but it’s in line with APTV stock’s long-term annual returns of 25% since its IPO.

Chart courtesy of StockCharts.com

High Demand Continues Despite Challenging Environment

For the third quarter ended September 30, Aptiv reported revenue of $3.7 billion, essentially flat compared to the same period last year. (Source: “Aptiv Reports Third Quarter 2021 Financial Results,” Aptiv PLC, November 4, 2021.)

The company reported third-quarter 2021 net income of $86.0 million, or $0.32 per share, versus $283.0 million, or $1.05 per share, in the same prior-year period. Its third-quarter adjusted net income was $108.0 million, or $0.38 per share, compared to $320.0 million, or $1.13 per share, in the prior-year period.

Aptiv PLC’s president and CEO, Kevin Clark, said the lower revenue was a result of persistent and widespread supply chain shortages, a situation he expects to improve in 2022. 

Clark also said, “…our automotive customers continue to prioritize their vehicles with higher active safety content, while penetration of high voltage platforms accelerate[s]. These trends, and our unique ability to capitalize on them, are driving record revenue growth over market for Aptiv.” (Source: Ibid.)

Analyst Take

Aptiv PLC continues to perform well, despite the tough economic climate. While the company has been negatively impacted by the ongoing global computer chip shortage, it reported solid third-quarter results. Moreover, Aptiv has maintained its revenue growth forecast and full-year adjusted guidance.

Longer-term, with a return to economic normalcy, a high demand for EV electronics, and the expansion of autonomous driving, Aptiv stock should continue to deliver exceptional value to shareholders.