Taking into account the company’s latest results and management’s outlook, we have updated the TE Connectivity model and raised our target share price from $ 135 to $ 160. The company’s business combines four key mega trends, namely: 1). safer and more environmentally friendly cars 2). Digitalization and automation of the real sector of the economy 3). Growth in global bandwidth demand 4). A growing sector of robotics that requires twice as many microelectronic components. The main risks for business include growing competition, in particular from Chinese companies, and the continuing uncertainty surrounding the situation with the restoration of supply chains.
TE Connectivity’s sales recovery momentum could continue through fiscal 2022, thanks to a sharper-than-expected recovery in auto production from 2020 lows. Almost 60% of the company’s revenue comes from the automotive sector. The active transition to electric vehicles is a key long-term growth factor for the company, where TE Connectivity is the undisputed leader. There are growth points in other sectors as well. For example, TE Connectivity supplies its products to the aerospace and telecommunications industries. The growing automation of operational processes and the development of cloud networks should become an additional long-term factor to support the company’s business growth.
TE Connectivity Ltd’s products and solutions are reported in three segments including Transportation Solutions, Industrial Solutions, and Communication Solutions. Through its segments, the company mainly provides a wide array of connectors and sensors designed for the automotive, commercial transportation, aerospace, defense, oil & gas, energy, data& devices, appliance markets. Management has spent the last few years transitioning the portfolio towards harsh environment applications, both through acquisition and divestment, which now encompass 80% of sales. TE Connectivity was born as a result of the separation of the Tyco Electronics Ltd segment from Tyco International plc in 2007 and is headquartered in Schaffhausen, Switzerland.