Morgan Stanley Weighs In on Auto Supplier Stocks

Short interest has been rising on both LEA and ADNT

Jul 31, 2018 at 10:28 AM
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Morgan Stanley this morning updated its outlook on auto parts suppliers Lear Corporation (NYSE:LEA) and Adient PLC (NYSE:ADNT). For LEA stock, Morgan Stanley upgraded it to "overweight" from "equal weight" and lifted its price target to $214 from $209, saying the shares are trading at a discount to historical levels and that it expects the company to top earnings estimates going forward. In response, LEA shares are up 1.6% at $180.46.

ADNT, on the other hand, was downgraded to "underweight" from "equal weight," and saw its price target cut to $43 from $50. Morgan Stanley believes headwinds will persist for Adient, increasing risk around the stock. As such, Adient stock is down 1.9% at $47.90.

Despite being barely positive in 2018, Lear has been the better performer in the long run, as Adient stock sports a nearly 40% year-to-date deficit. Broader analyst sentiment is mixed on LEA, while ADNT has earned nine "hold" or worse ratings, versus just two "strong buy" ratings.

However, both stocks have been targeted by short sellers. Short interest on LEA jumped almost 18% in the last two reporting periods, and ADNT saw an almost 15% surge. As it stands now, almost 5% of Lear's float is dedicated to short interest, compared to nearly 8% for Adient.

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