On Thursday, UBS analyst at the financial firm adjusted the outlook for Nordic Semiconductor ASA (OL:NOD:NO), moving the stock from a Sell to a Neutral rating and setting a new price target of NOK92.00. The revision follows a period of recalibration in the company's financial estimates after a series of guidance misses.
Nordic Semiconductor's guidance for Q1'24 revenue was set at $70-80 million, which is significantly below the consensus estimates of $113 million. This adjustment was attributed to ongoing inventory digestion. Despite the low visibility, the analyst anticipates a rebound, forecasting quarter-over-quarter growth with Q2'24 revenue expected to reach $97 million. This projection is supported by industry peers indicating a stabilization in the Consumer electronics sector.
The resilience of pricing has also contributed to the upgraded rating. Contrary to expectations of a downturn, prices have held steady throughout 2023 and into 2024. Nordic Semiconductor reported a 52% gross margin in Q4'23 and anticipates a margin of around 50% in Q1'24. This performance aligns with trends observed among peers, suggesting that pricing strength is likely to persist.
The UBS analyst highlighted that the market has likely factored in the current lack of visibility into the stock price. A reverse Discounted Cash Flow (DCF) analysis suggests that the market's expectations are set for a 3-year Compound Annual Growth Rate (CAGR) to 2026 of 3%, with an 18% EBIT margin into perpetuity, which is in close agreement with the analyst's estimate of a 2% CAGR.
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