STMicro: Maintain $66 Fair Value Estimate Despite a Predictably Mild Outlook for 2024

Narrow-moat STMicroelectronics reported mildly disappointing fourth-quarter results and provided investors with a soft outlook for the first quarter and for all of 2024, even when considering the company’s expectations for a strong recovery in demand in the second half of the year. The guidance appears reasonable to us considering the weak forecast provided by peer Texas Instruments earlier this week, and we might be a bit more cautious than ST’s management when thinking about a second-half recovery. Still, ST has healthy bookings in automotive and more important, strong long-term secular tailwinds in automotive behind it. We maintain our $66 fair value estimate (EUR 63) for ST and continue to view shares as undervalued for long-term, patient investors willing to ride out the latest downturn in broad-based semis.