Why This Goldman Sachs Analyst Is Downgrading Auto Suppliers

The auto industry has been in focus, with EV makers gaining attention.

Auto volumes are likely to decelerate in 2024, after a year of “solid” growth in production and sales, with the easing of supply chain constraints, according to Goldman Sachs.

The Auto Analyst: Mark Delaney downgraded the rating for Magna International Inc MGA from Buy to Neutral and for Aurora Innovation Inc AUR from Neutral to Sell.

The Auto Thesis: Auto sales are likely to decelerate towards “typical historical levels” as pricing moderates, Delaney said in the note.

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“We believe the company’s relatively slower content per vehicle growth compared to our broader tier 1 coverage will limit EPS/FCF improvement especially as auto production growth moderates,” the analyst wrote.

“While Magna has been investing to support new programs in megatrend areas, we believe its backlog could be impacted by slower BEV ramps from key customers including Ford and GM (e.g. its battery enclosure business),” he added.

Aurora’s stock has recently rallied, Delaney stated. “We now believe that the ramp cadence for its AV trucks could be more measured over the intermediate term than we had previously expected to better reflect partner commentary and the pace of other AV ramps,” he added.

MGA, AUR Price Action: Shares of Magna and Aurora had declined by 5.64% to $55.83 and by 10.77% to $3.33, respectively, at the time of publication on Wednesday.

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Photo: Aurora video screenshot