STMicroelectronics escapes the great movement of dropping growth stocks, at work on the stock market since the beginning of the year. However, unlike the so-called “value” companies, which do not pay dearly since neglected by investors during the health crisis, by arbitration for the more resistant, the manufacturer of electronic chips still gained more than 40% on the Cac 40 last year (x3.5 in three years), driven by strong demand for electronic devices, such as smartphones, computers or video game consoles. Apple, which accounts for more than 20% of its turnover, is its biggest customer.
Due to the resurgence of the Covid-19 pandemic in Southeast Asia, the heart of global semiconductor production, the Franco-Italian giant may not have sold as many chips as its capabilities would have allowed it if factories in the region had not been closed, but he sold at a higher price, as his accounts attest.
Twenty days ahead of its official schedule, STMicroelectronics this morning unveiled its fourth quarter financial performance – part of it at least. The company, which holds the comparison against American and Asian competitors, said its turnover increased much more than expected over the last three months of 2021, to reach around 3.5 billion dollars (3, 15 billion euros), up 11% compared to the third quarter, yet already up around 7% in sequential data. It also indicated that its gross margin for the quarter should be either in the high range of its latest forecasts (41% to 45%), or be slightly above. It is this last scenario which is favored by the Stock Exchange. For analyst Stéphane Houri of the private bank Oddo BHF, “This clearly means that the gross margin has reached or slightly exceeded 45%, which is a record level, not seen since 2000.” The financial community, for its part, expected a gross profitability of just under 43%.
68 euros per share, the most optimistic goal
STMicroelectronics shares rose 6% this Friday on the Cac 40. The manufacturer of electronic chips thus takes the top of the list of the best performances of the Parisian index and signs, at the same time, the strongest increase of the index Stoxx 600 from major European stocks. As a ripple effect, the Dutch ASML, which equips the business with production machines, gained 2% on the Amsterdam Stock Exchange and, given its weight, plays the role of main support today at the Stoxx 600. The Norwegian Nordic Semiconductor and German Infineon are also surrounded. The pre-publication by STMicroelectronics of its fourth quarter accounts reflects a much more dynamic end of the year than expected for the entire sector. What also confirms the teasing from Samsung, better known for its smartphones and televisions than for its position as world number 2 in semiconductor production behind the pure founder TSMC. The Korean has also unveiled a preview of part of its fourth quarter results, which will be published in full on January 26. Its revenue of approximately 76 billion won (56 billion euros) and operating profit came out above expectations.
“This excellent performance [de STMicroelectronics] stems from dynamic markets in all the end markets that the group addresses and also its specific programs (‘engaged customers program’), with players like Apple, Tesla, Mobile Eye and probably others like Space X ”, we explain at Oddo BHF. “At first glance, thanks to this mix of higher sales and a much higher gross margin, we estimate that the 2021 earnings per share should come out at 2.12 dollars, or 6% above our forecast and the $ 2 consensus ”, writes analyst Stéphane Houri, who confirms his advice of “outperformance” on the title of the chipmaker, to aim for a price of 53 euros (more than the Bloomberg consensus of 48.5), giving hope for a new appreciation of 17% on the STMicroelectronics stock market. At the highest historical, during the Internet bubble, its action flirted with 77 euros. The most optimistic analyst, Jerôme Ramel from Exane BNP Paribas, has 68 euros as a target.
This year, as cars are increasingly crammed with electronics, the growth of STMicroelectronics is expected to be driven by the restart of the automotive industry. The company is one of Bank of America’s favorites to play the transformation of the world and, in its case, the rise of the electric car.