Lear (LEA): Examining Valuation After Deepening Palantir Partnership and New AI Transformation Gains

Lear (LEA) is making waves this week after unveiling a major expansion of its partnership with Palantir. The company announced it will broaden the use of Palantir’s Foundry, Warp Speed manufacturing OS, and AI Platform (AIP) across its entire global manufacturing footprint. This move is more than just a tech upgrade, as Lear credits these tools with powering its transformation program, helping the company automate processes, tackle tariff challenges, and save over $30 million in the first half of 2025 alone.

This kind of digital transformation is capturing attention for good reason. In terms of the stock, Lear’s shares have climbed 18% over the past three months, bringing the year-to-date gain to 21%. That recovery stands in contrast to a smaller 6% gain over the past year and a negative three-year return, suggesting fresh momentum is building as operational improvements take hold.

So where does this leave investors now? Is Lear an overlooked value in the midst of an AI-driven turnaround, or is the market already pricing in the company’s improved prospects?

Most Popular Narrative: 1.2% Undervalued

The prevailing narrative sees Lear trading at a modest discount to its projected fair value. Analysts broadly support a slightly bullish outlook, which is justified by future earnings potential.

"Lear's recent wins of modular, electronics-rich seating and wire programs with major global EV automakers (including nearly $1 billion in E-Systems awards year-to-date and strong interest in ComfortFlex/ComfortMax seats) position the company to benefit from growing demand for advanced vehicle electrification and connectivity. This sets the stage for higher revenue per vehicle and supports long-term top-line growth and margin improvement."

Want to unpack the strategic moves driving Wall Street’s consensus? This narrative centers on bold revenue growth, expanding margins, and earnings power. What are the pivotal figures propelling Lear’s fair value above the current price? Discover the numbers behind the story that shapes analyst conviction.

Result: Fair Value of $114.17 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent challenges with E-Systems and shifting automaker production schedules could undermine Lear’s long-term growth and put pressure on future earnings expectations.

Find out about the key risks to this Lear narrative.

Another View: DCF Model Points to Much Bigger Upside

Looking beyond analyst targets, our DCF model paints a strikingly bullish picture. It suggests that Lear’s shares are trading well below what future cash flows could justify. Could the market be missing a deeper value story?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Lear for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Lear Narrative

If you see Lear’s future taking a different course, or if independent research is more your style, crafting your own full narrative takes just a few minutes. Do it your way.

A great starting point for your Lear research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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