Analyst Note| Brian Colello, CPA |
STMicroelectronics reported strong first-quarter results and provided investors with a decent second-quarter outlook. We raise our fair value estimate for narrow-moat ST to EUR 33 per share from EUR 28 (and to $40 from $35 for the U.S. ADRs) and view shares as fairly valued. The firm remains bullish on semiconductor demand throughout the rest of 2021 and expects to reach $12.1 billion of revenue for the full year, which is a target that management didn’t expect to reach until 2023 as of a few months ago but thinks it can hit now because of the snapback in automotive and industrial chip demand. The 2021 forecast appears conservative to us, as ST’s revenue is typically higher in the second half of each year because of seasonality, but we suspect that supply constraints may limit ST’s upside in the next six to 12 months.