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Investing.com - Morgan Stanley (NYSE:MS) upgraded Realtek Semiconductor (2379:TT) stock rating to Overweight from Underweight on Friday, raising its price target to NT$650.00 from NT$475.00.
The upgrade comes after Morgan Stanley previously double-downgraded Realtek to Underweight in September 2024, citing concerns about cycle peak, limited PC semiconductor growth, and potential gross margin erosion.
Morgan Stanley notes that inventory build pulled in PC orders, driving stronger first-half performance for most PC semiconductor companies, though the firm remains bearish on PC semiconductors for the remainder of this year.
The firm now sees "idiosyncratic upside risks" for Realtek, particularly as a potential beneficiary of China’s semiconductor localization efforts in automotive ethernet technology.
Morgan Stanley calculates that automotive applications could account for 15-20% of Realtek’s revenue by 2027, up significantly from the current 5-10% in 2024, as the company expands its presence in China after successfully penetrating European Union and United States brands since 2018.
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