STMicroelectronics (STM)

[ap17]

Chip Stock Upgraded To Buy On Apple, Tesla Contract Wins

PATRICK SEITZ
7/11/2017

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Investment bank JPMorgan on Tuesday upgraded shares of chipmaker STMicroelectronics (STM) to the equivalent of a buy rating on attractive valuation and recent contract wins with Apple (AAPL) and Tesla (TSLA).

Autoplay: On | OffSTMicro has underperformed the SOX semiconductor stock index by 15% over the past three months and is trading at a discount to global peers based on 2018 estimates. But the market is underestimating the company's potential to outperform in the second half of 2017 and in 2018, JPMorgan analyst Sandeep Deshpande said in a note to clients.

He upgraded STMicro to overweight from neutral and said he sees 20% upside for the stock.

U.S. shares of STMicro rose 0.3% to 15.45 on the stock market today. STMicro has risen for five straight trading sessions, but is still 3% below its 50-day moving average, a key technical trading level.

IBD'S TAKE: For the latest news on chip stocks, visit IBD's news page Chip Stocks To Watch And Semiconductor Industry News.

STMicro is providing content for the front-facing 3D sensing module on the upcoming iPhone 8, he said. The 5.8-inch OLED display smartphone is expected to be unveiled in September.

"STMicro is one of the few semi companies with a substantial new Apple win for second-half 2017," Deshpande said. "Though the market may question the long-term sustainability of the win, STMicro certainly has that win for the next two to three years, meaning the market is being unduly bearish on the stock, in our view."

STMicro also is providing high-efficiency silicon-carbide power electronics for Tesla electric cars.

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