Sensata Earnings: We Like Strategic Refocus and Long-Term Prospects, but Fair Value to $64 From $69

We lower our fair value estimate for narrow-moat Sensata Technologies to $64 from $69 after lowering our short-term sales forecast. Sensata is trimming low-margin pieces of its portfolio, which we like but will weigh on growth over the next four quarters. Industrial and heavy vehicle demand remains weak and is another headwind to growth. We maintain our longer-term growth thesis for Sensata and continue to like its position in automotive electrification. We see the stock as a deep value play, with fundamental value well above the current stock price and a narrow economic moat but a lack of market confidence in management’s execution. We are optimistic about execution turning around with an ongoing search for a new CEO. We like the interim CEO’s focus on electrical protection as a growth vector within the automotive market, as we view this as the firm’s best opportunity.