An Oppenheimer analyst says shares of NXP Semiconductors (NASDAQ:NXPI), the Dutch chipmaker, are coming under pressure partly due to concerns about macroeconomic factors and its management's lack of clear reaffirmation of its third-quarter guidance.
NXP shares finished 4.4% lower Tuesday and fell another 1.5% in Wednesday’s pre-market session to US$88.25 after the company’s analyst day Tuesday in New York.
“We attribute sell-off at least partially to heightened investor macro/cycle fears coupled with management’s lack of clear reaffirmation of 3Q guidance,” said analyst Rick Schafer.
Tuesday’s analyst day presentation marked NXP’s first in-depth public update since the smartphone-chip maker Qualcomm (NASDAQ:QCOM) walked away in July from a US$44bn deal to buy the company after failing to get regulatory approval from China.
NXP is looking to boost its gross margins to 55% from 53% by the close of next year and to as much as 57% by the end of 2021 and is also considering selling off low-growth or low-margin businesses, its executives said.
Its advances since the collapse of its merger with Qualcomm also include a US$0.25 quarterly dividend and a $5 billion share repurchase program.
Read: NXP shares jump as Chinese regulators take another look at Qualcomm takeover bid
Revenues from NXP’s core auto, industrial and internet of things businesses are still driving NXP’s overall top-line growth, which is expected to average 5-7% annually over the next three years. And its management thinks advanced driving assistance systems (ADAS) will exceed 10% of NXP’s total revenues next year.
NXP’s Auto business still accounts for nearly half of its sales while its industrial and internet of things unit represents 21% of sales and is a US$28bn market growing 6% per year. Mobile, which makes up 13% of sales, meanwhile is expected to grow 4-6% annually, according to Schafer’s note to investors.
Rick Schafer concludes that with the failed Qualcomm acquisition behind it, NXP’s management appears to be redoubling its focus on fundamentals and growing NXP’s core business segments, led by auto. But Schafer is not getting behind NXP until its shares pick up traction.
“We remain sidelined for now as shares reset,” he said.