Top EU semi pick STMicroelectronics (STM) stock seen re-rating higher at BofA

BofA Securities analyst Didier Scemama reiterated a Buy rating, $78.00 price target, and Top EU semi pick designation on STMicroelectronics (NYSE: STM). The analyst sees a re-rating of the stock ahead.

The analyst commented, "We reiterate our Buy rating on STMicro, a top pick in EU Autos Semis, with an unchanged PO of €71/US$78. In our view, the stock trades at a discount to EU/US peers (6.8x CY24E EV/EBITDA vs EU/US peers on 8x-16.5x) for three reasons: 1) poor track record, 2) high Apple concentration and 3) high capital intensity/low cash returns. We believe concerns 1) and 2) are likely to fade over the course of the next 12-18 months as STM continues to execute on its CY25 model of $20bn/50% GM/30% OM and as Apple concentration drops to c10% exiting CY24E. Whilst concern number 3 is unlikely to be solved in the next 12-24 months (but likely after) we think investors underestimate STM’s ability to gain market share in MCUs owing to its growing EU production base."

For an analyst ratings summary and ratings history on STMicroelectronics click here. For more ratings news on STMicroelectronics click here.

Shares of STMicroelectronics closed at $50.48 yesterday.

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