Evercore maintains Outperform on APH and TEL, cuts ST stock rating
Investing.com
Published Apr 03, 2025 07:12AM ET
On Thursday, Evercore ISI released its annual investment primer focusing on the connector and sensor markets, highlighting the sub-sector's appeal within the broader technology industry. Analysts at Evercore estimate that the total connector market reached approximately $86 billion in calendar year 2024, while the sensor Total Addressable Market (TAM) was estimated to be between $40 and $45 billion. The report analyzes key aspects such as primary end markets, product offerings, secular trends, historical performance, and the competitive landscape. For investors seeking deeper insights into this sector, InvestingPro offers comprehensive analysis and valuation metrics for key players, including detailed Pro Research Reports covering 1,400+ top stocks.
The connector/sensor sub-sector is considered attractive due to several factors, including diverse end markets, industry consolidation, and strong free cash flow. Looking ahead to calendar year 2025, the focus will be on the scale of AI-related opportunities, the impact of potential tariff shifts on demand and supply chains, and a possible recovery in crucial end markets, such as Industrial & Mobile Networks.
Evercore has identified APH (NYSE:APH) as being well-positioned to navigate the current macroeconomic volatility, citing the company's diversified market exposure, effective M&A strategy, and agile cost structure compared to its peers. APH is expected to perform well in 2025 regardless of AI developments, although AI is seen as a significant tailwind.
TEL (NYSE:TEL) is also favored by Evercore for its strong position in the automotive sector, especially due to its presence in China. The company is anticipated to benefit from an expanding AI portfolio and is poised for upside potential in the second half of 2025, driven by an industrial recovery which is expected to aid in margin expansion.
Conversely, ST (NYSE:STM) has been downgraded to 'In Line' from 'Outperform' by Evercore analysts due to a more H2-centric turnaround, reduced near-term visibility, and growing macroeconomic challenges. The focus for ST will be on its margins and determining if they have reached a low point. Despite these concerns, Evercore maintains 'Outperform' ratings on APH and TEL, with APH continuing as a core growth story to own amidst recent market fluctuations, and TEL being an attractive play in the electric vehicle space with industrial recovery as a key driver for the latter half of the year. For APH specifically, InvestingPro analysis reveals a robust current ratio of 2.37 and strong return metrics, though current valuation multiples suggest the stock may be trading above its Fair Value. ST is facing short-term turnaround challenges, tariff headwinds, and market uncertainties.
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In other recent news, Amphenol has been in the spotlight with several significant developments. The company reported strong fourth-quarter results, with revenue and earnings per share surpassing expectations, largely due to its achievements in AI infrastructure. Truist Securities responded by raising Amphenol's price target to $102 and reiterating a Buy rating, citing promising guidance for the first quarter. Similarly, S&P Global Ratings upgraded Amphenol's credit rating to 'A-' from 'BBB+', reflecting its successful execution of growth strategies and strong business performance.
Amphenol's recent acquisitions, including CommScope’s Outdoor Wireless Networks and Distributed Antenna Systems businesses, are expected to enhance its market presence in mobile network solutions. BofA Securities adjusted its price target for Amphenol to $86, maintaining a Neutral rating, while noting the potential offsetting impact of muted trends in industrial and automotive sectors. Evercore ISI maintained an Outperform rating with a price target of $88, highlighting Amphenol's diversified market leadership and potential to surpass street expectations.
Additionally, Amphenol's strategic acquisitions, such as Andrews and Lifesync, are anticipated to contribute to earnings growth. The company's ability to manage tariff pressures and its strong liquidity position further bolster its outlook. However, concerns about DeepSeek's AI efficiency have impacted energy stocks, including Amphenol, as market perceptions shift regarding the demand for high-tech AI infrastructure.
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Written By: Investing.com
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