,
VLOF.PA). With recent disappointments in the company’s revenue growth
and ongoing investments in electric vehicle (or EV) and driver
assistance technologies pressuring margins, the shares haven’t performed
quite as well as investors might have hoped. What’s more, there are
near-term challenges like the status of Korean OEMs within China that
could continue to pressure revenue in the short term.
Even so, I believe these are short-term impediments to a strong long-term story. Along with rival Continental AG (OTCPK:CTTAY),
Valeo is carving out a strong position in the emerging EV ecosystem,
and the company is well placed to capture significant content share in
hybrids and pure electrics. Other opportunities like driver assistance
remain attractive as well, with Valeo having an uncommonly broad
technology footprint. A long-term target of 8% revenue growth and
low-teens free cash flow growth is hardly conservative for any
established auto parts company, but I believe Valeo’s leverage to EVs
and ADAS can support it, and those projections in turn support a fair
value about 10% higher than today’s price.
Read the article here:
Valeo Stuck In A Construction Zone, But An Attractive Highway Awaits
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