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On Thursday, STMicroelectronics (NYSE:STM) had its price target reduced by Craig-Hallum to $42 from $48, while the firm maintained a Buy rating on the stock. The adjustment follows the company's report of lower-than-expected guidance for the third quarter and the full year 2024, amid a downturn in demand in the automotive sector and stagnant industrial customer orders.
STMicroelectronics disclosed that gross margins (GMs) for the June quarter were at 40.1%, a decrease from the previous quarter, with expectations for GMs to be around 38% for the September quarter. The company attributed the declining GMs to an unfavorable product mix and increased charges due to unused capacity. The firm is now setting a GM target of 40% for the full year 2024.
Despite the near-term challenges, particularly the impact of the slowdown in electric vehicle (EV) demand on the automotive business, Craig-Hallum remains optimistic about the long-term prospects of STMicroelectronics. The analyst cited the company's ongoing focus on silicon carbide (SiC) growth for the fiscal year 2024 as a reason for their continued endorsement of the stock with a Buy rating, albeit with a lowered price target.
In other recent news, Wolfspeed (NYSE:WOLF) has delayed the construction of a $3 billion chip manufacturing plant in Germany, shifting focus to its New York site amid a softened EV market in Europe and the U.S. The delay underscores the European Union's challenges in bolstering its semiconductor industry.
Meanwhile, STMicroelectronics has experienced a decline in revenue and earnings, reporting Q1 2024 net revenues of $3.47 billion and a gross margin of 41.7%. Despite the decrease, the company plans to maintain a net capital expenditure of about $2.5 billion for strategic manufacturing initiatives throughout the year.
Goldman Sachs has revised its stance on STMicroelectronics, upgrading the stock from Sell to Neutral and increasing the price target to EUR42.50. This upgrade reflects improvements in demand across various end-markets, despite a year-to-date underperformance compared to its benchmark index and analog semiconductor peers.
InvestingPro Insights
In light of STMicroelectronics' (NYSE:STM) recent financial projections and the adjustments made by Craig-Hallum, a closer look at the company's financial health and market standing through InvestingPro metrics may provide investors with a broader perspective. As of the last twelve months leading up to Q1 2024, STMicroelectronics holds a market capitalization of 30.96 billion USD, with a Price-to-Earnings (P/E) ratio of 10.06, reflecting investor sentiment and company earnings potential.
Despite analysts forecasting a sales decline for the current year, STMicroelectronics remains a significant player in the Semiconductors & Semiconductor Equipment industry. The company has maintained dividend payments for 26 consecutive years, showcasing its commitment to shareholder returns, even in challenging times. Furthermore, with a dividend yield of 0.91%, investors might find comfort in the company's ability to generate income. It's worth noting that STM's liquid assets surpass its short-term obligations, indicating a strong liquidity position that can help navigate through market downturns.
To explore additional insights and for further guidance on STMicroelectronics, investors can access a range of InvestingPro Tips. For instance, the platform provides an assessment of the company's profitability over the last twelve months and its high return over the last decade. There are 12 additional InvestingPro Tips available for STM, which can be found at: https://www.investing.com/pro/STM. Interested readers can use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking valuable investment analysis and data.
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