As key markets start to turn, Infineon (OTCQX:IFNNY) has gotten more positive attention recently from analysts. Autos will still be down year over year in the next quarter (and quite possibly the one thereafter), but the trend is improving, and Infineon should see healthier auto, industrial, and appliance markets in calendar 2021. That, in turn, should drive better utilization and factory absorption, helping margins, while also taking in some of the expanded inventory.
I thought Infineon offered some relative value back in May, not to mention attractive revenue and margin upside tied to growth in auto and industrial markets. The performance since then has been mixed, with the local shares doing a little better than semiconductor sector as a whole, as well as NXP Semiconductors (NXPI) and Texas Instruments (TXN), while the ADRs have been considerably stronger. Relative to names I liked a little better, ON Semiconductor (ON) has done better, while STMicro (STM) has underperformed.
I don't see as much relative value in Infineon now, and I'd probably lean more toward STMicro, ON, and NXP. Not unlike ON, gross margins are a key driver now, and if Infineon can outperform here, there's certainly some upside to my base-case scenario.
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Infineon Ready To Leverage Recoveries In Auto And Industrial Markets
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