NXP Semiconductors To Bear The Brunt Of Continued Weakness In China, Analyst Cautions On Slowing Auto Orders

Mizuho analyst Vijay Rakesh reiterated a Neutral rating on NXP Semiconductors N.V. NXPI, lowering the price target to $210 from $225.

NXP Semiconductors reported Q3 earnings of $3.70 per share, beating the analyst consensus estimate of $3.59 by 3.06%. The company reported quarterly sales of $3.43 billion, beating the analyst consensus estimate of $3.40 billion by 0.94%.

NXPI guided to a weaker March quarter, down MSD-HSD% q/q and in line with typical seasonality, as the analyst sees many of the ICE OEMs pushing out EV projects as a medium-term headwind.

While NXPI is seeing stable orders, the analyst highlights investor concerns around weakness in China, slowing auto orders, and peak gross margins.

NXPI has seen auto growth in line with light vehicle production (LVP) for 2023E, the analyst mentions that under shipping demand, to avoid inventory build and a soft landing into 2024E and side-step competitor weakness.

The analyst adjusted December Quarter Revenue/EPS from $3.44 billion/$3.59 to $3.40 billion/ $3.65 (cons. $3.42 billion/$3.61).

Rakesh also adjusted FY24 estimates from $13.9 billion/$14.01 to $13.7 billion/$14.50 (cons. $13.9 billion/$14.85), and FY25 estimates from $14.9 billion/$15.71 to $14.6 billion/$15.92 (cons. $14.7 billion/ $16.41).

Overall, the analyst sees continued headwinds from slower auto demand due to macro headwinds, and continued weakness in China and expects FY24E to come in below consensus potentially.

Price Action: NXPI shares are trading lower by 1.54% to $182.94 on the last check Wednesday.