Wolfe Research Upgrades NXP Semiconductors NV (NXPI) to Outperform, 'We believe NXPI's CY25 EPS power is likely to remain intact'

(Updated - January 17, 2024 4:28 PM EST)

Wolfe Research analyst Chris Caso upgraded NXP Semiconductors NV (NASDAQ: NXPI) from Peerperform to Outperform with a price target of $255.00.

The analyst comments "We are upgrading NXPI to Outperform from Peer Perform with a $255 PT or ~14x our CY25 Bull Case Scenario EPS of ~$18, inline with NXPI's 14.4x avg multiple over the last 5 years). We’re concerned that the full extent of the Auto correction may not be dialed into NXPI numbers. But we don’t expect a MBLY-like miss, since management has been actively and aggressively managing channel inventory, and NXPI’s non-mobile businesses have already corrected. Valuation is compelling such that we expect to be buying weakness, even if another shoe drops in Auto. We believe NXPI's CY25 EPS power is likely to remain intact, irrespective of any incremental cut in Autos. Non-auto sectors were already cut in CY23, and are likely bottoming now. Importantly, more than any other covered company, we believe management has been very focused on channel inventory, proactively removing $500mn out of the channel - which we expect the company to eventually recover when the channel is re-stocked. While, NXPI currently trades roughly inline with its historical average FY2 P/E range of 12x-14x, and even on a ~20% cut to CY24 EPS to ~$11.80, the stock still trades at ~18x on trough earnings (well below peak FY2 P/E ~21x) – and we would expect earnings to recover quickly from that hypothetical trough due to the $500mn restocking benefit we expect NXPI to recoup once the analog downcycle unwinds."

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 $208.99 yesterday.

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