These 2 Auto Part Stocks Got a Tune-Up — UBS Says ‘Buy’

The global automotive fleet is aging. Increased prices, tariff and trade uncertainty, the possibility of recession – all of these are negative factors pushing customers to delay vehicle purchases. On a less gloomy note, better vehicle design and improved quality control in manufacturing processes mean that cars are just better, and are lasting longer – again, leading customers to delay new vehicle purchases.

Manufacturers are adapting to these conditions, but automakers are not the only game in town. When drivers keep their vehicles longer, they create a more robust market for aftermarket parts, with auto parts companies as the immediate beneficiaries.

Joseph Spak, automotive analyst from UBS, has taken the measure of the industry and explains why auto parts stocks are the way to go right now.

“On one hand, H1 is likely to remain relatively healthy and suppliers could potentially benefit from more positive sentiment towards Europe (c45-50% of peer group sales). On the other hand, visibility remains low with H2 still a question mark as the potential for US tariffs on EU-made cars and structural industry challenges are not going away. Possibly, ZF’s (ZF Friedrichshafen AG) comments about weaker LVP (light vehicle production) need to be seen against the internal pressures regarding the ongoing restructuring programme. We maintain a preference for supplier names generating higher EBIT margins, conservative 2025 guidance, diversified manufacturing footprints and resilient balance sheets…” Spak noted.

Spak follows these comments with two concrete recommendations, picking out a pair of auto parts stocks that he recently upgraded to Buy. Let’s take a closer look at them, using data drawn from TipRanks as well as the commentaries from UBS.

Visteon (VC)

The first auto part stock we’ll look at, Visteon, was founded 25 years ago in Michigan, and keeps its headquarters in Van Buren Township, between Detroit and Ann Arbor – and near the heart of southeast Michigan’s automotive industry. Visteon supplies technology and equipment for automakers, and its location near the region’s major airport gives it easy access to the global market.

Visteon has its hands in a wide range of automotive tech and parts. The company has taken a leading position in guiding the industry as it moves from analog instrument clusters to digital dashboards, providing 2D and 3D graphics, a wider range of integrated road and vehicle information, and even navigation displays. In short, the company is turning the traditional dashboard into a more immersive experience, putting the driver at the center of a digital cockpit designed to provide a ‘heads-up’ driving experience.

The company is also deeply involved in the development of improved electric drivetrains. While electric vehicles (EVs) currently make up only a small part of the global automotive fleet, their role is expanding, and newer, better technology will aid that expansion. Visteon is working on both battery and charging tech, approaching the EV field from the perspectives of energy provision and energy storage. The company has technology on the market to monitor battery temperature, voltage, and current during use, all vital for vehicle safety, and its battery connection technologies can support a variety of battery chemistries. On the charging side, Visteon is working with bidirectional power conversion, technology designed to allow a seamless integration of the vehicle charging station with the power grid.

Visteon’s work has created a portfolio of state-of-the-art products, all developed to enhance the ongoing digitalization and electrification of the automotive industry. The company works with OEMs on the global scene, and can provide parts and expertise for vehicles of all types, from consumer passenger vehicles to commercial transports and trucks to motorcycles. The company works with automakers in 17 countries, including such giants as Toyota, Volkswagen, and Stellantis.

Visteon started off 2025 with a strong first quarter. In its 1Q25 earnings release, the company reported a top line of $934 million, roughly flat year-over-year but beating the forecast by $23 million. The company’s bottom line was given as a GAAP EPS of $2.36, which was 45 cents per share better than expected. Visteon launched 16 new products in the quarter, and won $1.9 billion in new business. On the balance sheet, the company had net cash of $343 million at the end of Q1. The quarterly adjusted free cash flow came to $38 million.

Digging into the bull case, UBS analyst Joseph Spak is standing by his optimistic outlook on VC, including among his reasons: “1) seeing a true durable outgrowth story driven by increased penetration through diversifying and growing with new customers such as Toyota; 2) reasonable out-year expectations; 3) a valuation trading near the lows and a discount to the peer group which we believe is unwarranted.”

Adding some vital detail, Spak goes on to say, “We estimate VC’s sales with Toyota could grow at a +54% CAGR from 2024-2028, leading to 2028 VC sales of nearly $4.4bn. We note the Street is at ~$4.2bn for 2028 which is essentially VC’s existing 2027 guidance, so expectations seem low. Our resulting 2026/27 EBITDA forecasts are 7/6% above consensus, respectively. Better than expected 2028 revenue guidance, potentially issued with 4Q25 earnings, could be a catalyst. Near-term, we believe numbers are solid, and VC could benefit from better production at key customer Ford, China headwinds could stabilize in 2H25, improving outgrowth, and while VC paused their buyback, FCF should remain solid. We believe this program could be restarted later this year.”

These comments support Spak’s Buy rating (upgraded from Neutral) on Visteon’s shares, and his $142 price target (raised from $85) suggests that the stock will gain 24% in the coming year. (To watch Spak’s track record, click here)

For the Street as a whole, VC shares have a Strong Buy consensus rating, based on 12 recent reviews that include 9 Buys and 3 Holds. However, the stock is trading for $109.77, and the $110.67 average price target suggests the shares will stay rangebound for the time being. It will be interesting to see whether analysts update their targets or downgrade their ratings shortly. (See VC stock forecast)

American Axle & Manufacturing (AXL)

Now, let’s stay in Detroit and look at another parts supplier for the Motor City’s auto sector. American Axle has been in business since 1994, delivering power for car makers. More specifically, American Axle, also called AAM, is a designer and manufacturer of driveline and metal forming technologies, which are used in the drivetrains of internal combustion, electric, and hybrid vehicles.

AAM, in its lifetime, has become a top-tier automotive supplier, well known for its parts and supplies related to powertrains. The company’s operating system is well known for delivering both operational excellence and quality products. AAM has an active R&D segment, and over the past 30 years has invested more than $1 billion in new research initiatives, including creating 11 engineering development centers around the world.

What this all comes down to is a solid portfolio of parts and appliances, designed for today’s automobiles. AAM’s Driveline portfolio includes such items as front axles, rear beam axles, differentials, power transfer units, constant velocity joints, damped gears, and engine isolation pulleys – a wide range of products essential in transferring power from the engine to the wheels.

This is supported and enhanced by the company’s metal forming unit, which includes the processes of designing, engineering, and manufacturing forged metal parts. While automakers are turning to lightweight materials for car bodies and interiors to save weight, there are plenty of parts that still must be made of metal – and AAM has the expertise and industry experience to properly design and forge these precision parts. As with Driveline, the list is long – axle shafts, clutches, relay rods, scissor gears, and tie rod sockets make up just a small portion of it. The company also has a long list of processes, including hot and cold forging, autogaging, and induction heat treating (to name a few) that it uses in the manufacturing processes.

In an important development, American Axle in January of this year made an offer to acquire, and reached an agreement with, the British auto parts firm Dowlais. The transaction, planned to be in both stock and cash, is valued at approximately $1.44 billion. While it has hung over the company’s head for the past several months, both firms’ shareholders are expected to vote on the combination by the end of this month.

In the first quarter of this year, American Axle reported total sales of $1.41 billion. This was down 12% year-over-year, and missed the forecast by $14.5 million. The company’s non-GAAP earnings came to 9 cents per share, beating expectations by 3 cents. We should note here that shares in this company are down 17% for the year-to-date, underperforming the broader market’s ~6.5% year-to-date gain by a wide margin.

But on that note, UBS’ Spak is doubling down on his bullish view of AXL, including among his reasons: “1) A longer tail for core AXL programs such as GM’s full-size truck/SUV platform (T1XX) amid a relaxed US emissions regulatory environment. 2) GM adding US capacity is a net positive for AXL that could boost outer year earnings power and is not yet in consensus numbers. 3) At current levels, the proposed transaction with Dowlais (a UK listed automotive supplier) could potentially create long-term value, in our view.”

Spak wraps up by pointing out another potential support for the stock, writing, “Further, we note that AXL has meaningfully lagged vs. the supplier peers over the past quarter, which we believe is in part due to overhang from the proposed Dowlais transaction. Closure could be a catalyst; AXL votes on July 15 and DWL votes on July 22.”

The UBS analyst rates AXL as a Buy (upgraded from Neutral), and he gives the stock a $7 price target (raised from $4.5) to suggest an upside potential of 44% in the next 12 months.

That’s the bullish view, but this auto part supplier has a Hold rating from the analyst consensus, based on 5 reviews that include 2 Buy and Holds, each, and 1 Sell. The stock is selling for $4.85 and its $5.78 average price target points toward a one-year upside gain of 19%. (See AXL stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.