Company Reports

Melexis' second-quarter sales of EUR 217.1 million were ahead of guidance, and management's EUR 220 million-EUR 225 million guidance for the third quarter is ahead of consensus.

In its first-quarter update, Melexis maintained its outlook and expects second-half sales to be higher than the first half. We expect second-half sales to be up 10% sequentially to around EUR 450 million, with any sharper recovery likely happening in 2027.

So far, 2026 is shaping up to be another transition year in the automotive chip market. Melexis guided for first-half 2026 sales in line with the first half of 2025, with sequential growth in the second half of the year—momentum that could potentially carry into 2027.

Melexis is an asset-light, family-owned company focused on the sale of analog/mixed-signal automotive chips. In the past decade, Melexis has grown its revenue by almost 10 times organically, strengthening its competitive position by improving the versatility of its product portfolio. We estimate Melexis has many years of growth ahead, given that the number of chips per car (combustion, hybrid, or electric) keeps growing at high single digits annually as more chips are added to every car to improve performance, user experience, and safety. This growth, however, comes in batches, as the automotive semiconductor industry is highly cyclical.

Melexis is an asset-light, family-owned company focused on the sale of analog/mixed-signal automotive chips. In the past decade, Melexis has grown its revenue by almost 10 times organically, strengthening its competitive position by improving the versatility of its product portfolio. It now owns 75% of the intellectual property of its product sales, compared with 40% in 2006. We estimate Melexis has many years of growth ahead, given that the number of chips per car (combustion, hybrid, or electric) keeps growing at high single digits annually as more chips are added to every car to improve performance, user experience, and safety.

Melexis reported sales of EUR 215 million in the third quarter, in line with guidance, and expects to close 2025 with an overall sales decline of 10% due to the ongoing automotive chip correction.

Melexis' half-year results were ahead of guidance, reaching EUR 410 million in sales versus guidance of EUR 400 million. Automotive chip inventories continue to clear across the supply chain, and Melexis received more orders than expected this quarter.

Melexis' first-quarter revenue of EUR 198.3 million was in line with guidance, and management maintained its expectation of EUR 400 million in revenue in the first half of 2025. However, the outlook for the second half is now more uncertain than three months ago.

Melexis' fourth-quarter 2024 revenue was EUR 197.4 million, a 21% organic year-on-year decline and below management’s guided range of EUR 200 million-EUR 210 million. We are not surprised by this result given peers Infineon and ST Microelectronics also had weak automotive sales this quarter as the supply chain reduces excess inventories. Instead of giving full-year guidance, management guided for EUR 400 million in revenue in the first half of the year, followed by a significant improvement in the second half. The extent of this improvement is undetermined and will depend on automotive end-demand and inventory evolution.

Melexis is an asset-light, family-owned company focused on the sale of sensor integrated circuits, a type of analog/mixed-signal chip, to the automotive industry. In the past decade, Melexis has grown by almost 10 times organically, strengthening its competitive position by improving the versatility of its product portfolio. It now owns 75% of the intellectual property of its product sales, compared with 40% in 2006. We estimate Melexis has many years of growth ahead, given that the number of chips per car (combustion, hybrid, or electric) is expected to grow at high single digits annually as more chips are added to every car to improve user experience and safety.

We maintain our EUR 100 fair value estimate after Melexis gave a weaker-than-expected outlook for the last quarter of the year. Melexis now expects EUR 935 million to EUR 945 million in 2024 sales, down from EUR 1 billion previously, as European and US automotive customers have pushed out some orders given they have too much inventory. The exact timing of the correction is uncertain, but even if it extends into 2025, we don’t see any threat to Melexis' long-term thesis, and we anticipate that once customer inventories have been reduced, orders will rebound strongly—a situation known in the industry as the bullwhip effect. Melexis pushouts come from specific OEMs. We forecast lower sales than previously in 2024 and 2025, but a more pronounced recovery after. Given Melexis has the balance sheet capacity and cost structure to withstand any temporary downturn, we believe this is a good moment to invest in the shares, with our fair value estimate now offering more than 60% upside.

Melexis is an asset-light, family-owned company focused on the sale of sensor integrated circuits, a type of analog/mixed-signal chip, to the automotive industry. In the past decade, Melexis has grown by almost 10 times organically, strengthening its competitive position by improving the versatility of its product portfolio. It now owns 75% of the intellectual property of its product sales, compared with 40% in 2006. We estimate Melexis has many years of growth ahead, given that the number of chips per car (combustion, hybrid, or electric) is expected to grow at high single digits annually as more chips are added to every car to improve user experience and safety.

Narrow-moat Melexis' second-quarter sales of EUR 245.7 million fell within management’s range of EUR 242 million-EUR 247 million, which represented 4% year-over-year growth and 1.6% sequential growth. Melexis is outperforming other automotive peers by a wide margin. Competitors NXP and STMicroelectronics recently reported 4% and 8% sequential revenue declines in their automotive divisions, respectively, in deep contrast to Melexis' 1.6% growth. Melexis resilience comes from increased chip content in safety and comfort car applications where the firm is gaining market share and growth is agnostic from the type of car (internal combustion engine versus electric vehicle). Product innovations in car safety are also flowing from premium cars to more basic ones, resulting in revenue growth. We maintain our EUR 100 fair value estimate and reiterate this is a good buying opportunity for investors looking for exposure to the long-term trend of increasing chip content per car. Shares are undervalued.

Although narrow-moat Melexis just met its sales guidance in the first quarter, shares have jumped by 17% compared with the prior closing. We believe the market gave low credit to management’s first-quarter guidance given broad concerns about an autos volume correction hitting Melexis’ chip sales. Management even increased its guidance sequentially, guiding for EUR 242 million-EUR 247 million in the second quarter, compared with EUR 241.7 million in the first quarter. We maintain our EUR 100 fair value estimate for Melexis, with the shares still offering 25% upside. As we reiterated in the past, we believe Melexis shares are a good buy during cyclical lows, given auto chip sales correct more during market downturns, but then come back strongly when there is a recovery. Melexis’ clean balance sheet makes it an ideal candidate to withstand cyclical downturns.

Narrow-moat Melexis’ fourth-quarter 2023 helped ease investors' concerns over a potential downturn in the automotive chip cycle. Revenue grew by 12% year over year and management guided for 3% to 4% growth in revenue during fiscal 2024. In line with other peers, Melexis expects a weaker first half of the year followed by a stronger second half, according to its conversations with customers. Inventory at distributors keeps decreasing, but at some point during the year they should start being replenished. Growth in 2024 should mainly come from volumes as management expects pricing to remain relatively constant. We maintain our EUR 100 fair value estimate with shares offering 20% upside.

Melexis is an asset-light, family-owned company focused on the sale of sensor integrated circuits, a type of analog/mixed-signal chip, to the automotive industry. In the past decade, Melexis has grown by almost 10 times organically, strengthening its competitive position by improving the versatility of its product portfolio. It now owns 75% of the intellectual property of its product sales, compared with 40% in 2006. We estimate Melexis has many years of growth ahead, given that the number of chips per car (combustion, hybrid, or electric) is expected to grow at high single digits annually as more chips are added to every car to improve user experience and safety.

We believe narrow-moat Melexis shares offer an attractive buying opportunity at this point. Although we are decreasing our fair value estimate to EUR 100 from EUR 105 after adjusting our medium-term forecasts, shares offer 40% upside for long-term investors who are willing to endure a few quarters of uncertainty. Melexis is trading at 13.0 times the 2022 EBIT and 11.3 times the last 12 months' EBIT.

Melexis is an asset-light, family-owned company focused on the sale of sensor integrated circuits, a type of analog/mixed-signal chip, to the automotive industry. In the past decade, Melexis has grown by almost 10 times organically, strengthening its competitive position by improving the versatility of its product portfolio. It now owns 75% of the intellectual property of its product sales, compared with 40% in 2006. We estimate Melexis has many years of growth ahead, given that the number of chips per car (combustion, hybrid, or electric) is expected to grow at high single digits annually as more chips are added to every car to improve user experience and safety.

Narrow-moat Melexis shares were up 6% on the morning of Oct. 25 after strong results for the third quarter. The share price reaction has now moderated and shares are flat at the time of the writing. Sales increased 16% organically to EUR 249 million with an operating margin of 28.6%, the highest quarterly margin in several years. However, we do not expect this record margin to be maintainable in the long term and we forecast a terminal midcycle operating margin of 24%. We expect revenue growth will moderate in 2024 and 2025 as the supply of automotive chips keeps growing and demand moderates after the shortage since the coronavirus pandemic. We maintain our EUR 105 fair value estimate, with shares trading at 13.3 times the 2022 EBIT and 11.7 times the last 12 months' EBIT.

Melexis' second-quarter results are not surprising given several auto chip companies have already reported healthy results. Demand for auto chips remains steady and the chip shortage is improving. Second-quarter sales were EUR 237 million, at the higher end of the guided range, up 14% year over year and 4% sequentially. For the third quarter management expects sales to grow more than 4% sequentially (at the midpoint of third-quarter guidance). Management also upgraded its full-year guidance targets given the strong performance in the first half and expects a good performance for the remainder of 2023; it now expects sales to be up between 14% and 16% (previously 11% to 16%) with a gross profit margin above 45% and an operating margin of 27% (26% previously). We maintain our EUR 105 fair value estimate and see the shares as fairly valued as of Aug. 2.