STMicroelectronics' (STM) performance since my last update has been mixed; until very recently it was beating the broader SOX index, though it has been lagging peers/rivals like Infineon (OTCQX:IFNNY), NXP Semiconductors (NXPI), and ON (ON) more noticeably (while outperforming Texas Instruments (TXN)). Although short-term performance is notoriously tricky to predict, I believe STM’s beat-and-raise quarter should ease some concerns, though the second half auto-driven recovery was already well understood by the Street.
I’ve been more bullish than the Street on STM for a while now, and the Street has increasingly caught up to me. I still expect mid-teens long-term FCF growth and I still see a decent prospective return here, as well as relative undervaluation, but it’s not quite the slam-dunk it once seemed to be, even though I still see significant growth opportunities in auto power, ADAS, imaging, automation, and smartphone content growth.
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