Sensata Earnings: Headwinds Persist, but We Retain Our Long-Term Bullishness

We are maintaining our $71 fair value estimate for narrow-moat Sensata Technologies after the company reported first-quarter results slightly exceeding our revenue expectations. Despite continued headwinds from supply chain constraints, foreign exchange impacts, and inflation, we are pleased with Sensata’s ability to remain on track to meet its long-term targets. Our long-term thesis maintains that Sensata will be a beneficiary from secular growth in electric vehicles through its market outperformance in electrification. Positively, the firm reaffirmed its goal of $2 billion in electrification revenue by 2026 as battery electric vehicle content expands, an estimate that we view as achievable and paramount to Sensata’s success. Shares sold off after the release, falling more than the broader market, in our view due in part to tempered short-term profitability commentary that doesn’t worry us. We see shares as attractive.