NXP Semiconductors Has Already Sold Off Ahead Of Potentially Rockier Demand

A year ago, NXP Semiconductors (NASDAQ:NXPI) was a consummate example of “love the company, don’t love the stock (or the valuation, more precisely)”. Since my last update on the company, the shares have fallen about 18%, underperforming the SOX by around 17%, while names I preferred like onsemi (ON) and STMicro (STM) have done notably better. While nothing is fundamentally wrong with NXP, I think the weakness can be tied to limited margin upside over the next few years, as well as risk/vulnerability in the coming normalization (if not down-cycle).

I think a lot of the correction may already be in the shares and I’m increasingly intrigued by the value I see here. Although there are better plays to leverage auto electrification, NXP will generate growth here, and I like the company’s leverage to industrial automation, edge intelligence, and what I’d call “non-traditional” mobile (UWB in particular). I certainly acknowledge a risk that I may be underestimating the downside if the cycle really corrects sharply, but I still think NXP is set for high single-digit revenue growth and strong margins that can fuel an attractive long-term return from today’s price.

 

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NXP Semiconductors Has Already Sold Off Ahead Of Potentially Rockier Demand