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On Wednesday, BofA Securities analysts lowered the price target for STMicroelectronics (NYSE: STM) stock to $27 from $32, while maintaining their Neutral rating. Currently trading at $25.67, the stock sits between analyst targets ranging from $23 to $48.60. The decision comes amid updates to earnings projections and comments from the company’s CEO regarding trends in the second and third quarters. According to InvestingPro data, three analysts have recently revised their earnings estimates downward for the upcoming period.
Analysts increased their earnings per share estimates for calendar years 2025 and 2026 by 5.6% and 8.3%, respectively. These adjustments reflect positive remarks from STMicroelectronics’ CEO about upcoming quarterly trends, which are expected to counterbalance foreign exchange challenges impacting gross margins and operational expenses. As a prominent player in the Semiconductors & Semiconductor Equipment industry, the company maintains strong profitability with a 37.5% gross margin.
Despite the encouraging outlook on market cycles, BofA Securities highlighted potential risks associated with pre-tariff stock pull-ins anticipated in the second half of the year. As a result, the firm reduced its fiscal year 2027 earnings per share estimates by 7.6%. The company maintains solid financial health with a current ratio of 3.05 and more cash than debt on its balance sheet. InvestingPro analysis indicates additional financial strength metrics are available for subscribers.
At the new price target, STMicroelectronics stock would trade at 7.0 times the estimated enterprise value to EBITDA for 2026, an increase from the previous 6.0 times, yet still within the historical range of 5 to 10 times, excluding the COVID-19 period.
The analysts reiterated their Neutral rating, noting that the updated price objective reflects the evolving cycle dynamics observed in the semiconductor industry.
In other recent news, STMicroelectronics has announced several key developments. The company is projecting second-quarter sales of $2.71 billion, marking a 7.7% increase from the previous quarter, as inventory levels in Asia begin to decline. However, the automotive sector has not seen the expected demand increase, and a year-over-year decline is anticipated for the fiscal year 2025. BofA Securities has adjusted its outlook on STMicroelectronics, lowering the stock target to $25 while maintaining a neutral rating, citing ongoing inventory challenges and reduced gross margin projections.
STMicroelectronics also plans significant manufacturing upgrades to enhance competitiveness, focusing on advanced infrastructure and technology R&D. This strategic initiative is expected to result in substantial cost savings by 2027. In a separate development, the company has formed a joint development agreement with Innoscience to advance gallium nitride (GaN) technology, aiming to boost power solutions and supply chain resilience.
Additionally, Maurizio Tamagnini has resigned from the company’s Supervisory Board, a position he held since 2014. The company has not yet announced a successor. These developments highlight STMicroelectronics’ ongoing efforts to innovate and adapt in the rapidly evolving semiconductor industry.
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