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On Tuesday, Bernstein analysts highlighted the varied year-to-date (YTD) performance of analog and mixed-signal semiconductor stocks, noting that while some companies have seen negative earnings revisions, others have stabilized or are experiencing growth. The analyst firm pointed out that the sector has generally outperformed key indexes since the beginning of the year, as investors pursued a bottoming thesis for the first half of 2025. Despite this, absolute performance has been weak across all timeframes, and the stocks have lagged behind the indexes over the past month due to broader macroeconomic concerns and tariffs. According to InvestingPro data, leading semiconductor player Renesas has bucked this trend with an impressive 21.9% YTD return, showcasing the sector’s varying dynamics.
The performance of semiconductor stocks has been inconsistent, with companies like Microchip Technology (NASDAQ:MCHP), STMicroelectronics (NYSE:STM), and ON Semiconductor (NASDAQ:ON) seeing negative earnings revisions YTD. In contrast, Texas Instruments (NASDAQ:TXN), NXP Semiconductors (NASDAQ:NXPI), and Silergy have shown signs of stabilization. Analog Devices (NASDAQ:ADI), Infineon Technologies (OTC:IFNNY), and Renesas Electronics (TSE:6723) are on a positive trajectory with earnings growth YTD.
Investors are anticipating a second-quarter bottoming and subsequent growth in the second half of the year, particularly for companies heavily indexed to the industrial and automotive sectors. However, the automotive sector’s recovery remains uncertain, especially outside of China. Companies like TXN and NXPI are expecting near-term stability with a delayed recovery, while others like MCHP, STM, and Silergy are modeled for a more traditional recovery scenario.
Bernstein has maintained an outperform rating for Renesas, citing a clear bottoming of the cycle in the December quarter, with book-to-bill ratios at or above 1 since November 24, 2024, and expected growth in the June quarter. The firm also expects Renesas to benefit from growth in infrastructure, driven by Nvidia (NASDAQ:NVDA) AI server power integrated circuit share gains. InvestingPro analysis reveals strong fundamentals, with a healthy 55.6% gross profit margin and a solid financial health score rated as GOOD. The company maintains a comfortable current ratio of 1.26 and generated $1.3 billion in free cash flow over the last twelve months. According to InvestingPro’s Fair Value model, Renesas appears undervalued at current levels, supporting Bernstein’s positive outlook. For deeper insights into Renesas’s valuation and more exclusive ProTips, check out InvestingPro.
For China’s semiconductor sector, Bernstein continues to endorse Silergy with an outperform rating. The firm views Silergy as a high-quality long-term investment, especially with its return to secular growth driven by automotive analog growth in China. Bernstein forecasts Silergy’s top line to grow at a compound annual growth rate (CAGR) of 25-30%, with automotive growing at approximately 60% CAGR. This growth is expected to improve product mix, boost gross profit margins, and increase net profit margins due to a decreased research and development ratio. While the P/E ratio on 2025 earnings per share (EPS) may seem high at approximately 37 times, Bernstein anticipates a rapid re-rating to around 20 times, considering the expected ~60% growth in net income, which they believe makes the valuation attractive. For comprehensive semiconductor sector analysis and exclusive valuation insights, visit InvestingPro.
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