Valeo Still Outgrowing The Market, But Investors Stung By Weak Guidance

The fourth quarter/second half earnings and 2021 guidance from Valeo (OTCPK:VLEEY) (FR.FR) seem like a Rorschach test of sorts for analysts and investors. If you liked the company/stock/story before, you'll find reasons to keep liking it as auto production recovers in 2021. If you didn't like it, you'll find reasons to stay negative, particularly on a pretty weak guide for 2021 revenue.

I'm in the former camp, as I feel Valeo's leverage to EV/hybrid launches and trends like advanced ADAS still don't get full credit as the company incurs the costs today for greater revenue and margins down the road.

These shares have risen about 17% since my last update, a very mediocre performance next to peers like BorgWarner (BWA), Continental AG (OTCPK:CTTAY), and Faurecia (OTC:FAURY), particularly after the earnings report. At this point I still see these shares as meaningfully undervalued, but I do note that Valeo management has to start delivering better results to change the tone, particularly with respect to EV wins in 2021.

 

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Valeo Still Outgrowing The Market, But Investors Stung By Weak Guidance