Up about 37% from my last update, STMicroelectronics (STM) (“STMicro”) has gotten a little more credit for its growth and margin improvement potential, but the shares have still lagged the sector, as investors were put off by a more cautious tone at management’s December capital markets day and the shares lost some pace relative to the sector.
I can’t really fault how business is going at STMicro, even if the current pace is unlikely to be sustainable. With strong growth opportunities across an array of businesses, including microcontrollers (or MCUs) and RF in areas like autos, industrial, and IoT, as well as more efficient operations, I like this company’s outlook.
What I don’t like anymore is the price. The market has bid up the sector, and while there are some relative value arguments for STMicro, and an implied mid-to-high single-digit annualized total return isn’t bad, it’s hard for me to recommend this one with quite the same enthusiasm as before.
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