STMicroelectronics Delivers A Beat-And-Raise Quarter, With Long-Term Upside Still In Play

I’ve liked STMicroelectronics (STM) (“STMicro”) for a while now, based on the company’s leverage to multiple higher-value growth opportunities, including power management in auto and industrial markets, MCUs in auto, industrial, and IoT markets, and 3D sensing and MEMS across a range of markets, as well as margin leverage from improved utilization, higher-value business, and internal efforts like 300mm wafer use. Thus far, that’s worked out alright, with the shares up another third or so since my last update.

Although I’m worried that the chip sector (analog in particular) has come too far too fast in this rally, I’m less concerned about that with STMicro. The reason for that is that I see the company having comparatively better revenue growth opportunities as it enters new growth markets and gains share, as well as better margin leverage opportunities. My margin-driven EV/revenue model still shows upside into the low-to-mid $30s, but I wouldn’t be too surprised to see the sector cool off at some point in the near future.

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STMicroelectronics Delivers A Beat-And-Raise Quarter, With Long-Term Upside Still In Play