BorgWarner has historically outperformed in the first quarter
Vehicle components supplier BorgWarner Inc. (NYSE:BWA) this morning received a price-target hike to $52 from $48 at Evercore ISI. However, the shares were last seen trading 1.6% lower at $51.27, and are set to snap a three-month win streak after pulling back from their Nov. 30 record high of $55.86. However, data suggests this recent weakness could be an opportunity to catch long-term outperformer BWA's next leg higher.
For starters, the equity still sports a year-to-date advance of 30%, and is heading into a historically bullish time of year. Over the past 10 years, BorgWarner stock has ended the first quarter higher nine times, and has averaged a gain of 6.1%. A similar gain from current levels would put the shares around $54.40. BWA could also see support from the 80-day moving average, which kicked off its push toward record highs back in the third quarter.
There's also plenty of pessimism that could unwind and help fuel additional tailwinds for the security. One example is that almost half the brokerage firms tracking BWA stock say it's a "hold" or worse, and the average 12-month price target sits just overhead at $54.47. So upgrades and/or price-target hikes could be one upside catalyst.
Short interest is also elevated on BWA. Six percent of its float is dedicated to short interest, which would take more than eight days to cover, based on the security's average daily trading volume. And for what it's worth, it would seem the company has impressed on the fundamental front, as the stock has increased in the session after earnings in five straight quarters.
For those interested in buying short-term options contracts, now could be the time to strike. That's because BWA's Schaeffer's Volatility Index (SVI) currently stands at 21%, putting it in just the 6th annual percentile. In other words, volatility expectations appear muted at the moment.