STMicroelectronics: Headwind In 2025 And Lower Long-Term Targets

seekingalpha11-21

STMicroelectronics' new targets are well below previous estimates.The company indicates that Q1 2025 sales are weaker than anticipated, with a potential H2 recovery. Before re-priced for positive ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2485127368?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1547238585/image_1547238585.jpg","is_english":true,"pubTime":"2024-11-21 04:09","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2485127368","market":"fut","top_or_hot":-1,"title":"STMicroelectronics: Headwind In 2025 And Lower Long-Term Targets","media":"seekingalpha","content":"<div>\n<p>STMicroelectronics' new targets are well below previous estimates.The company indicates that Q1 2025 sales are weaker than anticipated, with a potential H2 recovery. Before re-priced for positive ...</p>\n\n<a href=\"https://seekingalpha.com/article/4739107-stmicroelectronics-stock-headwind-in-2025-lower-long-term-targets\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>STMicroelectronics: Headwind In 2025 And Lower Long-Term Targets</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSTMicroelectronics: Headwind In 2025 And Lower Long-Term Targets\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-21 04:09 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4739107-stmicroelectronics-stock-headwind-in-2025-lower-long-term-targets><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>STMicroelectronics' new targets are well below previous estimates.The company indicates that Q1 2025 sales are weaker than anticipated, with a potential H2 recovery. Before re-priced for positive ...</p>\n\n<a href=\"https://seekingalpha.com/article/4739107-stmicroelectronics-stock-headwind-in-2025-lower-long-term-targets\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"IE00BMPRXR70.SGD","symbol_name":"Neuberger Berman 5G Connectivity A Acc SGD-H","start_time":0,"source_url":"https://seekingalpha.com/article/4739107-stmicroelectronics-stock-headwind-in-2025-lower-long-term-targets","article_id":"2485127368","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1547238585/image_1547238585.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2485127368","pubTimestamp":1732133364,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"STMicroelectronics' new targets are well below previous estimates.The company indicates that Q1 2025 sales are weaker than anticipated, with a potential H2 recovery. Before re-priced for positive earn","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"IE00BMPRXR70.SGD":"Neuberger Berman 5G Connectivity A Acc SGD-H","STM":"意法半导体","IE00BMPRXN33.USD":"NEUBERGER BERMAN 5G CONNECTIVITY \"A\" (USD) ACC","BK4585":"ETF&股票定投概念","BK4588":"碎股","BK4141":"半导体产品","BK4554":"元宇宙及AR概念"},"translate_title":"意法半导体：2025年逆风和较低的长期目标","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"STM":0.9},"content_text":"STMicroelectronics' new targets are well below previous estimates.The company indicates that Q1 2025 sales are weaker than anticipated, with a potential H2 recovery. Before re-priced for positive earnings changes, we decided to wait-and-see.STM's share price has declined by almost 50% year-to-date, prompting a cautious 12-month outlook and a revision of 2025 valuation numbers.   JHVEPhoto  Over the year, we analyzed STMicroelectronics (NYSE:STM) twice. In our first report (Q1 analysis), we deep-dive into 3 Risks To Price, and in our second report (Q2 analysis), we decided to Look Beyond 2024. Despite a Fiscal Year 2024 outlook cut, we reported an Attractive Risk/Reward. Even if we were discussing headwinds in the automotive segment and further industrial market deterioration, we believe we were sufficiently derisked. Additionally, in the H1 comment, we reported lower turnover and margins, and more importantly, we flagged higher inventory levels. Today, the company released a Capital Market Update and pushed out their previous 2025-27 targets to 2030 (Fig 1). STMicroelectronics outlined new 2027-28 targets, 9-16% above consensus core operating profit. Since our last update, STM's total return has decreased by 26.27% (Fig 2), and the company's share price has declined by almost 50% on a year-to-date basis. This is so bad that it may be a good time to double down; however, we are now more cautious on a 12-month horizon, so we decided to lower our 2025 numbers and change the company's valuation accordingly.   STMicroelectronics changes in estimates Source: STMicroelectronics CMD 2024 presentation - Fig 1   Mare Ev. Lab Rating Changes  Fig 2 Lower Financials Targets During STM's last Capital Market Day in 2022, the company targeted reaching>$20 billion in top-line sales in 2025-2027 with a gross and EBIT margin of 50% and 30%, respectively. This was also coupled with a free cash flow of >25%. Following the new CMF print-out, this guidance has been postponed to 2030. With the latest estimates, STM's sales CAGR move down from 4/5% to 9/10% per year. Looking at consensus expectation, we also report that STM aims to reach sales of $18 billion in 2027/2028, which is 10% already above Wall Street guidance. However, there is an alignment between gross and EBIT margins. However, there is a gap in the abs value. All new targets are at an exchange rate of $1.09/€1:00. Additionally, the company includes a high triple-digit million $ in cost savings (Fig 3). This was already communicated in the Q3 results.   STM Cost Saving Plan Fig 3 With lower-than-anticipated 2024 sales, we enter FY 2025 with an even weaker expectation. There is an expectation for an H2 2025 recovery; however, we are not pricing this scenario. The company saw a double-digit decline in sales in its 9M performance and has now indicated that the decline will be worse than normal seasonality in Q4 and Q1 2025. This means that STM might start the new year with an 18-20% sequential sales decline. Backlog delivery indications, current orders, and inventories support this. Additionally, as reported in Fig 4, Q1 2025 will have fewer working days. Consequently, this sales decline will significantly impact the gross margin. This is based on CAPEX underutilization and price pressure. Even if the market expects improvements in H2 Apple production and industrial market recovery with no more destocking activities, this H1 earnings decline significantly impacts our STM financials forecast.   STM Q1 guidance Fig 4 Earnings Changes and Valuation Following the CMD with a revised company outlook and incorporating STM Q3 results, we update our model. Given the outlook's visibility, we have lowered our Q4 sales projection by 3% due to the industrial market activities and the automotive slowdown. Our sales estimates declined because of the Q1 expectation, factoring order dynamics, and ongoing backlog (and a shorter quarter). Since the H2 recovery is unknown, STM is more exposed to new customer wins. Our previous expectations were set with 2025 to-line sales and EBIT projections of $15.5 and $3 billion. We now assume a limited mid-single-digit growth in 2025. This is also considering STM's first fully integrated silicon carbide industrial facility. Factoring this in, our team has lowered our Fiscal Year 2025 sales by an estimated 15%. In numbers, STM sales projections are now set at $13.45 billion. Aside from a lower sales growth rate, there is a rationale for a downgrade in the core operating profit. Our 2025 automotive segment was too high, and we decided to model a 12% decrease. Despite a growing SiC segment, STM cut its Gross Margin evolution to sub-40%. This suggests a challenging environment. Additionally, CAPEX under-utilization continues to hamper margins, and in 2025, there will also be a more significant depreciation due to past investment activities. All told, we significantly decreased our core operating profit, arriving at an EBIT of $1.63 billion. To safeguard STM's FCF, the company decreased its CAPEX plan in 2025-2027 (Fig 5). That said, going down to the P&L forecast, our 2025 net income came in at $1.19 billion with an EPS of $1.3 (€1.23). Pricing a declining auto and a deep correction in industrial demand, we cut our target price from €48.6 to €22.15 per share. STM's current stock price is €23 per share. So, with our deteriorating assumptions, we now move our rating to neutral. Our target price is derived from STM's last five-year P/E historical average (Fig 6). The multiple is unchanged from our previous update at 18x P/E.   STM New Capex Plan Fig 5   STM SA Valuation Data Fig 6 Risks Our team has a good coverage of STM's downside risks. So, we report the following:  Changes in currency development, with a weakening of the $/€ FX A slowdown in consumer electronics due to lower demand; Changes in GDP growth and lower industrial demand. We also consider headwinds in the automotive segment; Technology product life cycles (iPhone) and STM's ability to deliver new image-sensing products to smartphones; Chinese restrictions could impact STM's P&L and its growth capacity. CAPEX execution and utilization rate are also two vital risks Elevated inventory levels.  Conclusion We moved to a wait-and-see approach based on the latest company’s guidance. STM upside is now skewed to H1 2025. Due to STM’s sales exposure, we believe the company will need more time to recover. For this reason, we have moved our rating to an equal weight.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.4","shortVersion":"4.29.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2485127368"}