Wells Fargo Names NXP Semiconductor 'Top Post-Pandemic Idea'

NXP Semiconductors NV NXPI shares have struggled to keep pace with tech peers in 2020, but one analyst said Tuesday now is the time for investors to step in and buy the stock.

The NXP Analyst: Wells Fargo analyst Gary Mobley initiated coverage of NXP with an Overweight rating and a $175 price target.

The NXP Thesis: In the note, Mobley said NXP a "top post-pandemic idea" for investors looking to play the economic recovery. He said his bullish thesis is based on three main factors:

• There will be secular growth in the amount of semiconductor content per vehicle in the global auto market.
• NXP has an opportunity to gain significant market share in the automotive semiconductor market.
• NXP also has significant exposure to high-growth areas such as secure, contactless mobile payment and authentication and proximity sensing.

NXP’s revenue declines have been worse than its peer group in 2020 given 56% of the company’s revenue comes from the auto and mobile markets. However, Mobley said these two markets will drive outsized revenue growth for the company in 2021 as the world recovers from the pandemic.

“Assuming NXPI can experience 14% revenue growth in FY21, something quite achievable in our opinion based on an easy y/y comparison, and assuming NXPI can claw back to $2.4 billion in quarterly revenue by the end of FY21, NXPI could be on a path to $8.25+ in annual non-GAAP EPS power,” Mobley wrote in the note.

NXP shares are currently trading at just 15 times Mobley’s base case fiscal 2022 EPS estimate.

Benzinga’s Take: Semiconductor stock investors know it's difficult to find a stock trading at just 15 times forward earnings with the Nasdaq trading at all-time highs. In fact, despite many high-profile tech stocks making new all-time highs, NXP shares are still trading at a slight discount to where they started the year.

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