NXP's Share Price Already Assumes A Lot Of Growth And Improvement

Quality semiconductors aren’t by and large selling all that cheaply anymore, as the sector has recovered sharply from March panic-low prices as the Street has gotten more comfortable with the likely downside in Q2 and Q3 from the Covid-19 business disruptions. In the case of NXP Semiconductors (NXPI) we have a story where there’s significant growth potential as well as self-improvement potential (execution), but a lot of that already appears to be in the share price today.

I like NXP’s leverage to electric vehicles and advanced auto content growth, not to mention its strong position in markets like microcontrollers (or MCUs), near field communication (or NFC), high-power RF, and IoT. I also see meaningful potential for the company to improve gross and operating margins. The problem is that today’s valuation now takes those improvements as largely a given and I think there are better values in the high-quality chip category.

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NXP's Share Price Already Assumes A Lot Of Growth And Improvement