This Chipmaker has plenty of upside!
STMicroelectronics (STM) has quite the resume:
- Among the world’s largest semiconductor companies
- A leading Integrated Device Manufacturer serving all electronics segments
- A leading technology innovator (approximately 7,500 people working in R&D, ~16,000 owned patents in ~9,500 patent families and ~500 new patent filings in 2016)
- Delivering solutions that are key to Smart Driving and the Internet of Things
- Rich and diversified portfolio (discrete and standard commodity components, ASICs, full custom devices and semi-custom devices, and Application-Specific Standard Products)
- A pioneer and visionary leader in sustainability
The stock has taken off over the past few weeks after it was announced that STMicroelectronics has a major deal in the works. The expectation is that the deal is with Apple to be a supplier in the iPhone 8. STM has confirmed it is expecting a substantial increase in revenue from a major deal in the second half of 2017. This lines up with the release date of the iPhone 8 and its research with Apple to build better cameras.
Even without this “new deal”, STM has seen impressive growth with analysts expecting 12.5% annual sales growth and 750% annual earnings growth in Q1 2017. This stock has had a hot run recently, but could see an additional boost in momentum in the second half of 2017.
Let’s take a look at a great opportunity in semiconductor industry…
Overview of STM:
Company: STMicroelectronics N.V. (STM)
Dividend: $0.20 per share per year
Profile: STMicroelectronics is a global independent semiconductor company which designs, develops, manufactures and markets a broad range of semiconductor integrated circuits and discrete devices used in a wide variety of microelectronic applications, including telecommunications systems, computer systems, consumer products, automotive products and industrial automation and control systems.
Reasons to Buy
- STM is well positioned to profit from the emerging trend toward more advanced electronics content in automobiles.
- It has shed underperforming business units to focus on the more productive lines of business. This should help increase the bottom line and widen profit margins.
- It just recently announced a MAJOR deal that will significantly increase revenues in the second half of 2017.
5 Point Stock Inspection
- Earnings Trend: Grade B
- Solid Earnings Growth Trend, solid Momentum, and a history of Surprises
- Positive Analyst Earnings Revisions
- Financial Health: Grade A
- Stronger financial profile than 52.99% of stock universe
- Solid Sales Growth: Healthy 3-year growth
- Operating profit margin in current year is greater than the previous year
- Free Cash Flow growing for each of past three years
- Net profit margin greater than industry average
- Momentum: Grade A
- Strong Momentum
- Relative Strength is 96 out of 100
- Relative Strength in top 30% of stock universe
- Stock up over 160% over past 12 months
- Risk: Grade A
- Lower risk
- Beta slightly below market (0.88)
- Has lower risk profile than just 56.37% of stock universe
- Valuation: Grade A
- Forward P/E at 21.35, is in line with the industry average
- Good buy under $18/share
Overall: Grade A
STM is Europe’s largest chipmaker with a broad product lineup. It has some very promising growth opportunities on the horizon with its microcontrollers, sensors, and automotive products. This company has a bright future and could see a huge boost in sales later this year.
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While Dual Returns has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.