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On Wednesday, STMicroelectronics NV (NYSE:STM:FP) (NYSE: STM) received an upgrade from Jefferies analysts, shifting the stock rating from Hold to Buy and increasing the price target to EUR34.00, up from the previous EUR23.00. Currently trading at $24.41, InvestingPro analysis suggests the stock is undervalued. The firm’s outlook on the semiconductor company is positive, anticipating no further cuts to consensus estimates and projecting growth to pick up in the second half of 2025.
The upgrade is grounded in several key expectations, including a normalization of operations following an inventory correction, increased components in the upcoming iPhone 17s, and a rebound in industrial demand. With a solid financial health score rated as "GOOD" by InvestingPro and a strong current ratio of 3.11, STM appears well-positioned to navigate this transition. Jefferies analysts point to several structural drivers that could bolster STM’s performance, such as Edge AI, low Earth orbit (LEO) satellites, silicon photonics, and automotive microcontrollers (MCUs).
STMicroelectronics is expected to experience a re-rating as the industrial and automotive chip cycle gains momentum. Despite a 23.24% revenue decline in the last twelve months, the company maintains a strong market position with $13.27 billion in revenue and has consistently paid dividends for 27 consecutive years. The analysts at Jefferies are optimistic about the company’s prospects, particularly as it stands to benefit from the aforementioned technological advancements and market recoveries. For deeper insights into STM’s financial health and growth potential, investors can access the comprehensive Pro Research Report available on InvestingPro.
The semiconductor industry has been facing challenges with inventory adjustments and fluctuating demand, but STM is positioned to navigate these obstacles effectively. The anticipated normalisation post-inventory correction and the company’s involvement in cutting-edge technologies are likely to contribute to its growth trajectory.
STMicroelectronics’ new price target reflects a significant increase, suggesting that Jefferies sees considerable upside potential for the stock. The firm’s analysts are confident that STM will emerge stronger in the latter part of 2025, driven by the acceleration of the industrial and automotive chip cycles.
In other recent news, STMicroelectronics has been in the spotlight due to a series of analyst downgrades and potential workforce reductions. BofA Securities downgraded the semiconductor company’s stock rating from "Buy" to "Neutral" and reduced its price target from EUR 29.00 to EUR 23.00. Similarly, Barclays (LON:BARC) downgraded the stock rating from Equalweight to Underweight and lowered the price target from €25.00 to €20.00 due to concerns about the company’s future performance.
TD Cowen analysts also downgraded STMicroelectronics from Buy to Hold and reduced the price target to $25 from $32, citing concerns about downstream inventory pressures in the semiconductor industry. Amid these developments, the company is reportedly considering a workforce reduction of approximately 6%, potentially affecting between 2,000 and 3,000 employees due to decreased demand in the industrial and automotive sectors.
On a positive note, Bernstein maintained an Outperform rating for STMicroelectronics, identifying potential growth drivers such as e-mobility, advanced driver-assistance systems (ADAS), and AI server power. However, these recent developments serve as a reminder of the challenges and uncertainties that STMicroelectronics and the broader semiconductor industry currently face.
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