Phinia initiated with an Overweight at Morgan Stanley

Morgan Stanley initiated coverage of Phinia (PHIN) with an Overweight rating and $50 price target. Phinia, which was spun out by BorgWarner (BWA) in mid-2023, is the most internal combustion engine, or ICE, exposed pure-play in the firm’s supplier coverage and as such the firm believes Phinia is “the purest expression of our ‘ICE is Nice’ thesis,” the analyst tells investors. EV pessimism is in “full swing” and the firm calls Phinia a “key beneficiary of the EV-reset, adding that it thinks Phinia can generate substantial cash flows for longer than the market anticipates at the current valuation. Citing approximately 100% free cash flow conversion and an 8%-9% combined cash return yield, the firm calls the stock its “preferred risk/reward amongst US suppliers.”