NXP Semiconductors (NXPI) Guide Down More Aggressive Than End Demand Trends - Mizuho
NXP Semiconductors (NASDAQ: NXPI) 15% reduction in 4Q15 guidance is to correct some of the inventories that built up in the past quarter. Ex-inventory alignment, guidance would have only been down low to mid-single digits. NXPI does not think it has lost any market share or key designs and sees weakness as a "pause" and expects demand to improve.
There were 3 areas of weakness:
Autos- the weakness in 4Q15 was driven by infotainment, car-radio aftermarket weakness in Japan and China, and increased channel inventory.
Secure interfaces and Power- NXPI noted the down 20-30% guide reflects weakness in the China basestation market and order delays
Secure connected devices- China handset OEMs delayed implementing NFC but NXPI expects to see China OEMs to ramp NFC in 2016
NXPI continues to see overall 10% top line growth on a 3-year CAGR, given trends in Automotive and NFC.
NXPI believes the Freescale Semi merger approval is tracking to expectations and approval should be given in early 4Q.
Vijay Rakesh from Mizuho believes the guide is much more aggressive than the end demand trends suggest as NXPI corrects inventory. Maintain Buy rating and $140 PT.
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Shares of NXP Semiconductors NV closed at $90.92 yesterday.