Opinions
Alexander MacDonald
TE Connectivity
TEL-Q
TOP PICK
May 08, 2024
N/A
Stock price when the opinion was issued
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They make connectors (to electrical currents) and sensors. 43% of revenues are to the car industry. As car builds increase, so will demand for connectors and sensors, twice as much for EVs than gas cars. Their revenues rose 12% last year even while car production slowed (due to shortages). Their products are also used in medical devices and renewable energy, many applications. TEL used to be part of Taiko Electronics, so they've been around for a while. (Analysts’ price target is $166.80)
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EV's are part of their growth story, about 40% of their revenues, though accounts for 60% of their growth. The other 40% comes from internal combustion engines; gas cars are getting more electrified, too, which also contributes to TE's growth. She likes their industrial exposure. Their communications division benefits from growth in cloud computing. TE makes acquisitions, too, to grow.
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This indirectly plays EV car growth, which is slow now, but long term will increase. TEL makes sensors and even gas-powered cars need more sensors. US business has slowed by TEL, but most of their growth comes from China. They have many clients. Also, data centres need their sensors and there are more and more centres. Despite a weaker topline, their margins and productivity are improving
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His entry in the car market. Connectors in combustion engines, more in hybrids, and even more in full electric. Likes this exposure better than having to bet on one car company. Also makes highly engineered connectors for data centres, seeing substantial growth with AI craze and cloud computing strength. Yield is 1.8%.
(Analysts’ price target is $163.19)