Hook & thesis
BorgWarner (BWA) is no longer just a turbocharger-and-drivetrain incumbent. The company’s ePropulsion business - which makes inverters, on-board chargers, DC/DC converters and combination boxes - gives management a real product play into electrification infrastructure beyond vehicle powertrains. Combine that engineering optionality with meaningful free cash flow generation and improving market sentiment, and you get a trade setup that favors a controlled long position today.
My thesis: the market underestimates how quickly power-electronics revenue can scale relative to traditional component cycles. If BorgWarner can win a handful of OEM or infrastructure contracts that leverage its inverter/charger IP, the company’s multiple (current P/E roughly 50) will expand modestly while absolute cash flow continues to grow. The technical picture shows bullish momentum that supports a mid-term trade into $70 with a tight stop to limit drawdown if the momentum reverses.
What BorgWarner does and why it matters
BorgWarner provides technology across combustion, hybrid and electric vehicles through three segments: Air Management, Drivetrain & Battery Systems, and ePropulsion. The ePropulsion segment focuses on power electronics - inverters, on-board chargers and DC/DC converters - products that are directly relevant to EV OEMs and increasingly to adjacent markets like fleet charging and, potentially, data-center DC power conversion.
Why the market should care: power-electronics products are higher-margin, software-enabled content that can scale with vehicle electrification and infrastructure builds. The company reported free cash flow of $1.179B and an enterprise value of roughly $15.37B, which implies the business already converts a meaningful slice of revenue into cash. EV powertrain and charger markets are forecast to grow materially over the next several years - growth drivers that play directly to BorgWarner’s existing product set.
Hard numbers that support the setup
- Market cap: about $13.09B.
- Enterprise value: ~$15.37B; EV/EBITDA about 6.9.
- Free cash flow: $1.179B.
- P/E: roughly 50x on reported EPS of ~$1.34.
- Balance sheet: debt-to-equity ~0.72; current ratio ~2.07; quick ratio ~1.70.
- Technicals: current price $62.79, 10-day SMA $55.20, 50-day SMA $47.96, RSI ~75 suggests strong momentum but also short-term overbought conditions; MACD shows bullish momentum.
- Dividend: quarterly cash dividend $0.17 per share, payable 03/16/2026 to holders of record 03/02/2026.
Two facts stand out. First, the company produces real cash flow; $1.179B in free cash flow gives management flexibility to invest in new product lines or pursue partnerships. Second, valuation multiples - a P/E near 50 - already reflect a growth premium. For the trade to work, the company must continue to deliver execution on higher-margin power-electronics content and the market must reward that execution with multiple expansion or simply recognize improved top-line momentum.
Valuation framing
At a market cap of roughly $13.1B and enterprise value ~$15.4B, BorgWarner’s EV/EBITDA of ~6.9 and price-to-free-cash-flow near 11.7x reflect a mixed picture: the company is not cheap on earnings multiples but does generate robust cash. Historically (noting its 52-week range: low $24.40 on 04/09/2025 to high $70.08 on 02/12/2026), the stock has shown it can re-rate quickly when macro and auto-cycle conditions improve. If BorgWarner can show incremental revenue from power-electronics wins or higher content per vehicle, even modest margin expansion could justify the target we lay out below.
Catalysts to watch (near-term to mid-term)
- OEM contract announcements for inverters, on-board chargers, or DC/DC solutions - these are direct revenue catalysts.
- Expanded partnerships in the EV or commercial fleet space, such as the Cascadia Motion collaboration on electric drive units.
- Sector reports and industry adoption curves for electric powertrains and turbocharger upgrades - positive industry reports can lift multiples.
- Quarterly results showing sequential improvement in ePropulsion revenue and margin contribution.
- Dividend payments and buyback cadence that indicate management confidence in cash generation (quarterly dividend of $0.17 payable 03/16/2026).
Trade plan (actionable)
| Entry | Stop | Target | Direction | Horizon |
|---|---|---|---|---|
| $62.79 | $57.00 | $70.00 | Long | Mid term (45 trading days) |
Rationale for horizon: technical momentum is already in place (price well above 50-day SMA, bullish MACD), but fundamental recognition of new power-electronics wins can take several weeks to materialize and be digested by the market. A 45-trading-day horizon balances momentum capture with time for one quarterly update or a contract announcement to materialize.
Position sizing: treat this as a medium-risk growth play. With a stop at $57.00 the downside from entry is about 9.2%. Scale in if price consolidates above $60 and reduce size or exit if price breaks $57 on volume.
Technical context and flow
The stock opened today near $66.06, hit an intraday low of $62.50 and is trading at $62.79. Volume has been elevated relative to the 2-week average, and recent short-volume prints show active short interest with days-to-cover rising to ~6.9 as of 01/30/2026 - a number that can fuel short squeezes if positive news arrives. RSI at ~75 signals overbought on a pure technical basis, so be ready for pullbacks; the trade uses a tight stop to protect capital if momentum cools.
Risks and counterarguments
- Execution risk: moving from component supplier to infrastructure supplier requires different sales cycles and certification timelines. A failure to land OEM or infrastructure contracts would leave the company dependent on legacy cycles.
- Valuation vulnerability: the stock trades at a P/E near 50. If sales or margins miss expectations, the multiple can compress quickly and move the stock materially lower.
- Macro/auto cycle risk: EV production plans, inventory swings at OEMs, or a slowdown in vehicle demand could reduce near-term orders for power electronics.
- Competition and pricing pressure: power electronics is a contested space with specialized players; aggressive pricing or faster-than-expected competitor wins could cap BorgWarner’s margin upside.
- Technical pullback risk: RSI suggests the stock could experience a short-term correction; a break below the $57 stop would likely signal momentum failure.
Counterargument: one could argue the market already prices in BorgWarner’s power-electronics opportunity. The P/E and recent run to a 52-week high ($70.08 on 02/12/2026) mean a lot of good news is reflected in the price. If new contract announcements are incremental rather than transformational, the stock may trade sideways and momentum positions could underperform. That is why this trade uses a mid-term horizon and a disciplined stop.
What would change my mind
I would abandon the bullish stance if any of the following occur: a) quarterly results show shrinking ePropulsion revenue or margin headwinds; b) the balance sheet deteriorates or free cash flow reverses materially; c) price breaks and holds below $57 on high volume, negating the momentum thesis; or d) a competitor secures exclusive OEM agreements that substantially reduce BorgWarner’s addressable market for inverters and chargers.
Conclusion
BorgWarner combines a legacy position in turbochargers and drivetrains with an increasingly important power-electronics franchise. The company’s cash generation ($1.179B free cash flow) and reasonable enterprise valuation (EV/EBITDA ~6.9) provide a cushion for growth investments. The trade outlined above - entry $62.79, stop $57.00, target $70.00, mid-term (45 trading days) - seeks to capture momentum while protecting downside if execution or sentiment falters.
This is a medium-risk, event-sensitive play: it benefits if the firm converts its engineering platform into wins with OEMs or infrastructure partners, and it is defensible with a clear stop if momentum fails to translate into tangible contracts or improving fundamentals.
Key dates to monitor
- 03/02/2026 - Record date for the quarterly dividend (ex-dividend date).
- 03/16/2026 - Dividend payable date.
- Next quarterly earnings release - monitor for ePropulsion revenue and margin detail.
Trade summary: Long BWA at $62.79, stop $57.00, target $70.00. Mid-term (45 trading days). Size to your risk tolerance and tighten or exit if the $57 level fails.