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Analyst Blog

Shares of NXP Semiconductors NV (NXPI - Snapshot Report) hit a new 52-week high of $104.64 on Sep 30, 2016, eventually closing at $102.01. The stock has been particularly buoyant in recent times, jumping 30.8% over the past three months. The closing share price also represents a strong one-year return of 18.8% and a year-to-date return of 21.1%.

The price increase was supported by a significant rise in share volume. Average volume of shares traded over the last three months is 4.07 million.

What is Driving the Stock Upward?

The stock has been witnessing upward momentum since the company reported  second-quarter fiscal 2016 earnings on Jul 28, 2016. Adjusted earnings per share of $1.16 per share came ahead of the Zacks Consensus Estimate of $1.11 per share. NXP Semiconductors’ revenues grew 57% year over year to $2.365 billion and surpassed the Zacks Consensus Estimate of $2.350 billion.

The company also provided an encouraging third quarter revenue guidance. For the third quarter of fiscal 2016, NXP Semiconductors expects revenues in the range of $2.415 billion to $2.515 billion. The Zacks Consensus Estimate is pegged at $2.465 billion.

Moreover, the stock looks attractive from a valuation perspective. This is because NXP Semiconductors currently trades at a forward P/E of 21.44x compared with the industry group average of 25.10x, which signifies a huge upward potential.

NXP Semiconductors, a global semiconductor company known for its automotive and chip identification business, has seen massive growth in the portable device segment over the past year. This trend is expected to bode well for the company in the near term.

Persistently strong adoption of tablets and smartphones, automotive electronics and the emergence of a new category of wearables boosted the demand for processing and sensing devices that run them. This should boost NXP Semiconductors’ revenues, going forward.

With the acquisition of Freescale Semiconductor, NXP Semiconductors has now become the world’s leading provider of automotive semiconductor solutions and general purpose microcontroller products. We believe that this acquisition will prove to be accretive to earnings in the to-be reported quarter.

As per IC Insights, IoT semiconductor sales will increase 19% in 2016 to $18.4 billion and will grow at a CAGR of 19.9% from 2014 to 2020. In 2016, IoT semiconductor revenues in smart cities will grow 15% to $11.4 billion, connected vehicles 66% to $787 million, wearables 22% to $2.2 billion, connected homes 26% to $545 million and industrial Internet chip 22% to $3.5 billion. Hence, we believe that NXP Semiconductors will be able to deliver strong financials in the coming quarter on the given predictions fueled by the demand for Internet chips.

Nonetheless, macroeconomic weakness, competition from Xilinx Inc. (XLNX - Analyst Report) and Lattice Semiconductor Corp. (LSCC - Snapshot Report) , consolidation in the telecom market, declining margins and volatility in the semiconductor market remain headwinds.

NXP SEMICONDUCT Price and Consensus


NXP Semiconductors has a Zacks Rank #3 (Hold). A better-ranked stock in the technology sector is Equinix Inc. (EQIX - Analyst Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

Equinix has a long term-expected EPS growth rate of 16.94%

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