Between a painful inventory correction in 2019, the 2020/2021 pandemic, an earthquake, and a March fire in a key fab, Renesas Electronics (OTCPK:RNECF) (OTCPK:RNECY) (6723.T) has been snake-bit here of late, leading to a weak share price performance – the shares are down about 8% since my last update (the ADRs have done modestly better), underperforming the SOX by close to 10% over that short period.
Renesas has scrambled to minimize and mitigate the impact of the fab fire, and they’ve done quite a good job here. Far from a “lost year”, Renesas is still likely to see very strong revenue growth in 2021 on recovering auto and industrial demand, with solid margin leverage even accounting for the unexpected fire-related costs.
The biggest risk I see for Renesas is that the company ends up losing more microcontroller (or MCU) share in autos to NXP Semiconductors (NXPI) and others like Texas Instruments (TXN) and STMicro (STM), and that efforts to diversify the company’s addressable markets (including the Dialog Semi acquisition) don’t go to plan. I think those risks are more than captured by the share price, though, and I believe the shares offer an attractive double-digit long-term annualized return.
Read the full article here:
Renesas Electronics Looking To Rise Like A Phoenix From A March Fab Fire
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