STMicroelectronics (STM)

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Is STMicroelectronics NV (ADR) (NYSE:STM) Stock A Buy Before Earnings?
Eddy Parton - July 18, 2017

STMicroelectronics NV (ADR) (NYSE:STM) is expected to report earnings on 7-26-17 before market opens. STMicroelectronics are Europe’s largest semiconductor chip maker based on revenue. Moreover, the company owns and operates its own semiconductor wafer fabs. The company was founded in June 1987 and is headquartered in Plan-Les-Ouates, Switzerland.

STMicroelectronics (STM) 5 year stock price chart

Source: Bloomberg
STMicroelectronics (NYSE:STM) is set to benefit from semiconductor growth for smart cars and smart homes

Good news for STMicroelectronics (NYSE:STM). According to International Business Strategies (IBS), the global semiconductor market will be $655.6 Billion in 2025 compared to $342.7 Billion in 2015 with CAGR of 6.7%. Moreover, the semiconductor and sensor markets for Internet of Things (IoT’s) will have significantly higher growth than the overall semiconductor market, with a CAGR of 15.3%.
Global semiconductor market forecast to grow at a CAGR of 6.7% from 2015 to 2025

Source IBS
About the business

STMicroelectronics (NYSE:STM) designs, develops, manufactures and markets products, which offers discrete and standard commodity components, application-specific integrated circuits (ICs). Full custom devices and semi-custom devices for analog, digital and mixed-signal applications.

It operates through the following segments:

Automotive and Discrete Group – Comprises of all dedicated automotive ICs (both digital and analog), and discrete and power transistor products.

Analog and MEMS Group – Comprises of low-power high-end analog ICs, smart power products for industrial, computer and consumer markets, touch screen controllers, low power connectivity solutions and metering solutions for smart grid and all MEMS products.

Microcontrollers and Digital ICs Group – Comprises of general purpose and secure microcontrollers, EEPROM memories, and digital ASICs.
2016 Revenue breakup

Source: SaxoTrader

Going forward the company has decided to focus on the huge growth areas of smart driving (auto technology) and the IoT’s. Even today STMicroelectronics supplies 35 components on average for each new car produced.
STMicroelectronics revenue drivers going forward include:

Semiconductors – Reducing costs with scale, new innovations and technology.
Internet of Things – Ultra low power, security, sensors and actuators, connectivity, signal conditioning and protection, power conversion and monitoring drivers, power and energy management.

Smart Driving

Car digitization (sensor fusion processors, 77GHz/24GHz RADAR processors, machine vision processors, 32-bit MCUs specific for automotive, infotainment processors, telematics processors, positioning, Wi-Fi, tuners, V2X connectivity), and global navigation satellite systems (JV with Allystar).
Analog and power technologies (smart power ASIC’s and ASSP, image and MEMS sensors, battery management IC’s, Motor controllers/drivers, HV MOS, IGBT power drivers, silicon carbide diodes and MOSFETs).

The key to understand is that STMicroelectronics will be a key player in providing the infrastructure behind future smart cars, and smart homes.
Financials and Valuation

STMicroelectronics has a market cap of US $14.3b and an enterprise value of US $14.1b.

2017 PE is 21.9, and 2018 PE is 16.6. Net profit margins for 2017 are forecast to be 8.45% and rising in 2018. Company debt is zero. Dividend yield is 1.54%. Analyst consensus estimates are for a target price of US $15.53.
STMicroelectronics financials graph

Source: 4-traders


Competitors

Broadcom (NASDAQ:BRCM), Intel (NASDAQ:INTC), Micron Technology (NASDAQ:MU), Nvidia (NASDAQ:NVDA), NXP Semiconductors (NASDAQ:NXPI), Qualcomm (NASDAQ:QCOM), Samsung Electronics (KRX:005930) (LON:BC94) (OTCMKTS:SSNLF), SK Hynix (KRX:000660), Taiwan Semiconductor Manufacturing Company (NYSE:TSM), and Texas Instruments (NASDAQ:TXN).

https://bnlfinance.com/2017/07/18/is-stmicroelectronics-nv-adr-nysestm-stock-a-buy-before-earnings/