Jefferies upgrades STMicroelectronics to ’buy,’ sees growth from H2 2025

Investing.com -- Jefferies has upgraded STMicroelectronics (EPA:STMPA) to a "buy" from a “hold” rating, raising its price target to €34 from €23, citing expectations of a business recovery from the second half of 2025, in a note dated Wednesday. 

Shares of the semiconductor manufacturer were up 7.7% at 08:00 ET (13:00 GMT). 

Analysts at Jefferies believe STM has reached the lowest point of its revenue and margin correction, with gradual improvements anticipated from Q2 2025 and a more substantial rebound in H2 2025.

The upgrade follows a period in which Jefferies had maintained a cautious stance on STM, predicting a major inventory correction in the industrial and automotive semiconductor sectors. 

Now, analysts believe the worst is over and forecast a reacceleration in growth driven by several key factors.

One of the primary catalysts for STM’s projected recovery is an expected increase in content within Apple’s upcoming iPhone 17 lineup, with Jefferies estimating an additional $3 in content per device. 

This increase is attributed to STM’s meta-optics-based 3D sensor solution for Face ID, which eliminates traditional refractive lens components, leading to miniaturization and improved integration. 

The technology is expected to drive STM’s revenue growth not only in Apple (NASDAQ:AAPL) products but also in other consumer and automotive applications.

Jefferies also highlights STM’s role in edge AI microcontrollers, particularly its recently launched STM32N6 MCU, which has already reached $100 million in sales faster than any previous STM MCU. 

The brokerage anticipates strong demand for these chips as industries increasingly adopt AI-driven applications at the edge.

Another key driver of STM’s projected growth is its involvement in the low-Earth orbit (LEO) satellite sector. 

STM currently supplies components for Starlink, and its revenues from LEO satellite technology are expected to grow at a 20% compound annual growth rate, reaching over $900 million by 2027. 

The brokerage is also set to ramp up its silicon photonics business in H2 2025, supplying AI data centers, including AWS.

Jefferies sees STM’s valuation as attractive, with the stock trading at 12 times its forecasted 2026 earnings per share. 

Historically, STM has traded at an 18x price-to-earnings ratio during upcycles, and Jefferies believes the company will be re-rated as the industrial and automotive semiconductor cycle accelerates.

In light of these factors, Jefferies has revised its EPS forecast for 2026 to 22% above consensus, reflecting confidence in STM’s growth trajectory. 

The analysts suggest that if industrial demand rebounds more strongly than expected, STM’s earnings in 2026 and 2027 could outperform even their current projections.

With inventory corrections nearing completion and new structural growth drivers coming into play, Jefferies sees now as the right time to buy STM shares.