- Marzo 10, 2022
- Posted by: Oliver
- Categoria: Economics, Finance & accounting
American Axle & Manufacturing (AXL)
For the last stock, we’ll stay in the auto industry but shift to a different segment. American Axle & Manufacturing is an automobile components specialist. The company is a designer and manufacturer of driveline and metal forming technologies – its two segments are split into Driveline (the largest) and Metal Forming – targeting internal combustion (ICE) vehicles as well as electric and hybrid cars. The company offers an array of products, such as drive shafts, front and rear axles, clutch modules, universal joints and sealing and thermal-management offerings, amongst others. Services are available at 80 facilities, with locations in 17 different countries.
AXL stock has suffered at the hands of the market over the past year, falling by 34%. The latest earnings report did not help matters either. The company missed on both the top-and bottom-line. Revenue declined by 13.9% from the same period last year to land at $1.24 billion, $40 million shy of the consensus estimate. EPS of -$0.09 missed the analysts’ call of $0.03.
That said, Morgan Stanley’s Adam Jonas thinks the key with Axle is in the use of its “ICE cash machine,” and the analyst thinks the company won’t fall in to the trap of going all out on EVs.
“While many other legacy OEMs and suppliers would plough precious cash flow into EV projects that will likely not generate their cost of capital, we believe AXL is different… that it will likely use the majority of the cash flow to de-lever the balance sheet, ensuring a superior risk-adjusted allocation of capital rather than heavily investing into the high-risk/low return EV arena,” Jonas wrote.
Accordingly, Jonas gives Axle an Overweight (i.e. Buy) rating, accompanied by a price target of $16. The implication for investors? Potential upside of ~102%.
Not all on the Street are backing Jonas’ call; the stock’s Moderate Buy consensus rating is based on 3 Buys, 2 Holds and 1 Sell. That said, most think the stock is undervalued; going by the $11 price target, shares will appreciate ~39% over the next 12 months.
