Vivek Kumar
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NXP Semiconductor

Morgan Stanley in its latest research note downgraded NXP Semiconductor to “Equal-weight” from “Overweight” following significant multiple expansion but raised their stock price forecast to $213 from $190.

“After a period of outperformance, NXP Semiconductor (NXPI) has closed the previous valuation gap relative to peers. We still like the company’s position in autos and new growth drivers in areas like UWB, IoT and BMS. However, we now expect the stock to perform in line with the group and thus move to the sidelines,” noted Craig Hettenbach, equity analyst at Morgan Stanley.

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“We remain positive on NXP’s growth drivers and improved execution, although this now appears more appropriately reflected in the stock. This call could be early, considering the strength in the semi cycle and the company’s lean inventory in the distribution channel that should serve as a tailwind to growth, albeit these dynamics seem widely recognized at this point. Recent work from our equity strategy team points to multiple compression in 2021, placing a greater burden on estimate revisions from here. To this point, after significant upside to the company’s Q1 outlook provided in early February (revenue guided 10% above the Street and EPS 23% higher, or ~2x that of peers), meaningful EPS revisions are likely harder to come by near term.”

NXP is set to report its first-quarter earnings in late April. According to ZACKS Research, the company is expected to report earnings of $2.21 per share, which represents year-over-year growth of over 8% from $2.04 per share seen in the same quarter a year ago.

ZACKS Research forecasts net sales of $2.55 billion, up 26.4% from the year-ago period. For the full year, Zacks expects earnings of $9.37 per share and revenue of $10.46 billion.

NXP Semiconductor’s shares, which rose about 25% in 2020, surged over 33% so far this year.

Nineteen analysts who offered stock ratings for NXP in the last three months forecast the average price in 12 months at $206.63 with a high forecast of $250.00 and a low forecast of $168.00.

The average price target represents a -2.60% decrease from the last price of $212.14. Of those 19 equity analysts, 15 rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

Other equity analysts also recently updated their stock outlook. Keybanc raised the target price to $225 from $210. NXP Semiconductors had its target price increased to $250 from $215. The brokerage presently has an “outperform” rating on the semiconductor provider’s stock. Barclays boosted their price objective to $200 from $150 and gave the company an “overweight” rating.

Moreover, Cowen upped their price target to $225 from $220 and gave the stock an “outperform” rating. Raymond James upped their price target to $220 from $210 and gave the stock an “outperform” rating.

NXP Semiconductor (NXP) has attractive exposure to secular growth themes like EVs, increasing penetration of ADAS, connectivity, and mobile payments. Furthermore, the company has executed well this cycle and in particular, its lean channel inventory positions them well for a snapback as demand improves,” Morgan Stanley’s Hettenbach added.

“However, we move to the sidelines after a period of strong outperformance in the stock. NXPI’s multiple relative to peers has moved from a material discount to slightly above where it typically trades. Furthermore, we think meaningful EPS revisions are going to be more difficult to come by near term.”

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