Renesas Looks Undervalued As The Business Finally Bottoms Out

I was bullish on Renesas Electronics (OTCPK:RNECY) back in July and the shares have performed quite well since then (up 34%). But I’ve been bullish for a while and these shares have lagged since 2018, so I’m not exactly doing a victory dance here.

Renesas has struggled through not only a tough correction in the auto and industrial markets it serves, but also from plenty of self-inflicted issues regarding inventory and margins. The company’s weak performance versus its auto end-market has also raised valid questions about its competitiveness and long-term market share.

I’m still concerned about Renesas’s long-term market position, though it does still seem to be solid with its core Japanese OEM customers. I’m also more enthusiastic about the company’s plans to rationalize fabs over time, boosting margins and FCF. Although the near-term outlook for auto is still challenging (both company-specific and industry-general issues), I believe Renesas is in better shape and is still undervalued – one of the relatively few names in its peer group where I can say that.

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Renesas Looks Undervalued As The Business Finally Bottoms Out