NXP (NXPI) Ultimately Gets Acquired - Nomura (BRCM) (QCOM) (TXN)

Nomura analyst, Romit Shah, believes investors should be long NXP Semiconductors NV (NASDAQ: NXPI) based on a 13% potential upside estimate. He believes EPS will increase from $5.50-6.00 in CY16 to $9.00-10.00 in CY18. If management executes, the implied valuation discrepancy between NXP (9x) and comps (14-15x) is unsustainable. Ultimately, NXP gets acquired.

NXP stands out to large-cap suppliers such as Broadcom (NASDAQ: BRCM), Qualcomm (NASDAQ: QCOM) and Texas Instruments (NYSE: TXN) that might be considering transformational acquisitions.

As they evaluate the main criteria for acquisitions over the past year, NXP checks all the boxes: (1) Scale: NXPI is the fifth largest supplier by revenue; (2) Earnings accretion (~10-30%) based on operating leverage, interest expense and NOLs; (3) TAM expansion: 40% of sales are from automotive; (4) Distribution: NXPI has a significant presence in worldwide channels, which is valuable from a cross- selling perspective; (5) Strategic: NXPI is the market leader in several areas, including secure identification, MCUs, and mobile transactions.

The firm maintained a Buy rating and $100 price target on NXPI.

For an analyst ratings summary and ratings history on NXP Semiconductors NV click here. For more ratings news on NXP Semiconductors NV click here.

Shares of NXP Semiconductors NV closed at $88.39 yesterday.

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