We Remain Bullish on Sensata’s Long-Term Prospects After Q4; Shares Still Deeply Undervalued

We maintain our $71 fair value estimate for narrow-moat Sensata Technologies after the firm reported solid fourth-quarter results and provided positive longer-term commentary. We are impressed with the firm’s ability to navigate supply chain disruptions, foreign exchange headwinds, and component cost inflation, with strong fourth-quarter profitability. We believe Sensata is executing on its long-term strategy to drive growth from the electric vehicle transition with strong design win activity and electrification growth. Management also eliminated its inorganic growth target, preferring to focus on organic opportunities. We view this positively, reflecting the traction Sensata is building in electric and connected vehicles with its existing portfolio. We hold our long-term thesis that Sensata is well positioned for this endeavor and see shares as undervalued even after jumping 10% with results.