BorgWarner (NYSE:BWA) has been a battleground stock recently, and the company’s investor day last week changed basically nothing. BorgWarner bulls still believe (broadly speaking, of course) that the OEM insourcing is a manageable threat and that the company has assembled a compelling xEV portfolio. Bears still believe that insourcing will be a huge negative influence and that BorgWarner is doomed to a future with little revenue growth and weaker margins.
As an owner of BorgWarner shares, it’s pretty obvious which camp I’m in, though I wouldn’t consider myself a raging bull – there are very real threats that BorgWarner is facing, not to mention major modeling unknowns, and the company’s R&D and M&A plans run the risk of setting fire to significant amounts of shareholder capital.
I’ve chosen to take a more conservative outlook for the next five years, largely on elevated R&D spending and the risk of M&A swap-outs of higher-margin legacy ICE components for lower-margin (initially) xEV components, but my 2030 assumptions change by only a couple of percentage points, and I still believe these shares offer double-digit near-term upside and above-average long-term upside as well.
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BorgWarner's Recent Analyst Day Laid Out Clear Targets, But Settled Nothing
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