Infineon Earnings: Decent Results Overshadowed by Large, Perhaps Risky, Expansion Plans

Narrow-moat Infineon Technologies reported solid fiscal third-quarter results but provided investors with a more modest outlook for the September quarter. Shares are down 10%, perhaps out of concern for the company’s announcement for massive manufacturing expansion to its silicon-carbide, or SiC, power semis business. We’re net neutral on the announcement. We view it as a positive sign for long-term SiC demand and Infineon’s product roadmap, but is the exact type of expansion that adds risk to the business if it were to encounter factory underutilization or a SiC price war. We maintain our EUR 47 fair value estimate and view the selloff as a potential buying opportunity for investors.