Overview
UBS has downgraded BorgWarner to Sell from Neutral, arguing that the market already seems to be valuing in an optimistic trajectory for the automaker-supplier's nascent data center power offering, TurboCell. At the same time, the bank nudged its price target up to $55 from $49.
Growth context and near-term outlook
UBS said it supports BorgWarner's pursuit of new revenue streams given pressures in its traditional segments. The bank's model incorporates an expected 1% decline in BorgWarner's core Foundational and eProducts business in 2026, and it anticipates the battery segment contracting by roughly $210 million, or 1.5%.
Those declines form the backdrop for the potential contribution from TurboCell. UBS noted that a scenario in which TurboCell achieves about $300 million in sales in 2027 could partly offset the shortfalls in legacy areas. Initial capacity for TurboCell is cited at 2 gigawatts, and UBS sees room for additional capacity expansion beyond that level.
Longer-term revenue assumptions and UBS expectations
Under a more bullish projection, UBS said TurboCell could scale to about $1.5 billion in revenue by 2030. However, the bank's base expectation assumes a slower ramp, roughly half of that peak amount by 2030. Even if the aggressive scenario materializes, UBS estimates that about 50% of that upside is already priced into BorgWarner's shares today. The firm calculates only around 10% additional upside in a best-case outcome, which it does not find compelling on a risk-adjusted basis given execution uncertainties.
Execution and disclosure concerns
UBS flagged several potential obstacles. TurboCell is treated as a startup effort; BorgWarner has not previously produced turbines at industrial scale, introducing execution risk tied to mass production. The company has provided limited public detail on product pricing, technical specifications and the pathway to achieving $300 million in 2027 sales, which UBS interprets as an indication that the initiative remains at an early stage.
Part of the TurboCell arrangement includes a battery component that UBS notes would not be reflected as BorgWarner revenue but would add to end-customer costs. While UBS acknowledged positives such as improved availability and shorter lead times relative to conventional turbines, it emphasized that TurboCell remains under development and has not yet been commercialized.
Valuation
The new $55 price target is derived from a multiple of 10 times UBS's estimate of 2027 earnings. UBS characterized that valuation multiple as being at the upper end of the stock's historical trading range, but said it nevertheless reflects the potential contribution of the new data center power opportunity.
Additional service commentary
Separately, a stock-screening product called ProPicks AI evaluates BorgWarner alongside thousands of other companies using more than 100 financial metrics. The service purports to use AI-driven screening to identify stocks with attractive risk-reward profiles and cited past winners such as Super Micro Computer, which it listed as +185%, and AppLovin, listed as +157%.
Impacted sectors
- Automotive parts and suppliers
- Data center infrastructure and power systems
- Industrial manufacturing and energy equipment