STMicro Building Credibility Ahead Of A Major Ramp

I wouldn’t call STMicroelectronics' (STM) third quarter “perfect”, but it was good and not nearly as disappointing as Texas Instruments’ (TXN) update. More important, I think, is that this quarter helps build management credibility (as they guided to a stronger second half 2019 early this year), as the company continues to execute even against a worse-than-expected backdrop. With the company looking at some major product introductions/ramps over the next couple of years, including SiC MOSFETs, IGBTs, MCUs, and 3D sensors, I believe this good execution in a tough environment is quite encouraging.

I recommended picking up STM shares below $17.50, and investors got a couple of chances to do that after my last article ahead of a nearly 30% jump in the share price. The shares no longer trade below my DCF-based fair value, but buying below DCF value is usually only an option when the market has really soured on a chip company. I do still see upside from here, though, and I think it may be possible to establish a position and look to add if/when the tech sector gives you a periodic pullback.

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STMicro Building Credibility Ahead Of A Major Ramp