This name is now positioned to 'supercharge AI', Deutsche Bank says

Investing.com -- Deutsche Bank upgraded auto parts supplier BorgWarner (NYSE: BWA), from Hold to Buy, saying the company’s latest move into AI-focused data center infrastructure could materially change its growth trajectory.

"BorgWarner’s strategic entrance into the AI data center market, in our view, is a pivotal shift from being a traditional Tier-1 powertrain supplier to a more diversified multi-industrial entity - a move that warrants a valuation re-rate," the bank’s analysts said in a note.

At the center of Deutsche’s call is the company’s deal with TurboCell for a modular turbine generator system. Deutsche estimates the project could generate more than $300 million in revenue in 2027, describing it as only the first phase of a broader ramp-up.

At a full 2 gigawatt buildout, the revenue opportunity “clearly can be substantially larger,” the bank said, offering a secular growth tailwind for multiple years.

The deal, alongside BorgWarner’s better-than-expected fourth-quarter results, sent the company’s shares soaring more than 22% on Wednesday.

Importantly, Deutsche analysts expect the new revenue stream to carry mid-teens margins at the outset. “The revenue should increment at mid-teens margin to start, suggesting large scale isn’t even necessary for profitability,” they wrote.

As a result, the bank upgraded the stock to Buy and raised its price target to $82.

BorgWarner on Wednesday delivered solid fourth-quarter results, with revenue coming in at $3.57 billion, in line with Deutsche’s $3.55 billion estimate but below consensus expectations of $3.65 billion.

EBIT, however, beat both Deutsche and consensus forecasts, supported by recoveries that lifted operating margins by 100 basis points in the quarter.

For 2026, BorgWarner guided for net sales of $14.0 billion to $14.3 billion, below analysts’ expectations of roughly $14.7 billion, according to LSEG data.

You May Also Be Interested In

• SpaceX sets IPO price at $135 ahead of roadshow in break with Wall Street norms
• Aeva Technologies launches $100 million follow-on stock offering
• Some Glazer family members said to consider selling Manchester United plc (MANU) stake - Bloomberg