Why This Aptiv Analyst Turns Bearish After The Deal Between Rivian, Volkswagen

Aptiv PLC APTV was recently upgraded to Strong Buy in the Zacks rating system.

While the announcement of a joint venture between Rivian Automotive Inc RIVN and Volkswagen VWAGY may seem unrelated to Aptiv, it represents "a red flag," according to Piper Sandler.

The Aptiv Analyst: Alexander Potter downgraded the rating for Aptiv from Neutral to Underweight, while reducing the price target from $78 to $63.

The Aptiv Thesis: The joint venture between Rivian Automotive and Volkswagen focuses on "developing in-house electrical architecture, onboard ECUs, and vehicle software," Potter said in the downgrade note.

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Rivian Automotive, Tesla Inc TSLA, and some Chinese EV makers have realized they need to "configure their own electrical architecture, design their own onboard computers, and write their own code," the analyst wrote.

The systems are critical for automakers and relying on third-party companies such as Aptiv makes the process "too slow and too costly," Potter stated. "Apparently, VW has reached the same conclusion," he added.

"We also think APTV will keep falling short of its targeted growth range, due to SVA (smart vehicle architecture) cancelations and pricing pressure," the analyst further said.

APTV Price Action: Shares of Aptiv had declined by 10.13% to $65.31 at the time of publication on Wednesday.

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