NXP Semiconductors is headed for better times after a difficult two years, according to Morgan Stanley. Analyst Joseph Moore upgraded the stock to overweight from equal weight. His new price target of $257 implies shares gaining 21.8% from Tuesday’s close. The Dutch chipmaker has lagged the rest of the industry because it held back on shipments to direct customers and distributors, per Moore. Over the past 12 months, shares of NXP have declined 10.9%. Meanwhile, the VanEck Semiconductor ETF (SMH) has advanced 23% during the period. However, Moore thinks the stock has finally hit its trough. “Cyclical and secular tailwinds [are] aligning,” Moore wrote in a Tuesday note. “With conviction that the [microcontroller unit] cycle is finally bottoming, we see NXPI as the best positioned within our US analog/MCU coverage given the idiosyncratic tailwinds (auto outperformance, GM% expansion).” The company has also made structural improvements that position it for margin outperformance, Moore added. “We have stayed sidelined on NXP until now as while the company has managed the downcycle well we saw the auto semi correction during 2H 2024 to be a challenging headwind for the company,” he said. But “NXP’s cycle management is reflective of the company lowering utilization early (40% internal wafers) and controlling variable cost (70% variable vs 30% fixed),” the analyst added. Shares climbed more than 3% Wednesday before the bell following the upgrade. Year to date, the stock has added 1.5%. Most analysts are optimistic on the stock. LSEG data shows that 21 of 31 analysts who cover the chipmaker rate it a buy or strong buy. The average price target also signals nearly 18% upside.
