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STMicroelectronics NV ADR STM

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Morningstar’s Analysis

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STMicro Appears Poised to Weather the COVID-19 Storm; Maintain $30 (EUR 27) FVE, Shares Undervalued

Brian Colello, CPA Sector Director

Analyst Note

| Brian Colello, CPA |

Narrow-moat STMicro reported first-quarter results that were predictably below its original guidance in January because of the slowdown in automobile production and global semiconductor demand related to COVID-19. Yet the company doesn’t foresee a catastrophe in the second quarter and is anticipating a revenue recovery in the second half of the year, assuming both a recovery in manufacturing and also the company’s design wins in smartphones and other devices that are already secured. It’s hard to imagine that ST has a clear crystal ball at the moment, but the firm’s guidance of only a 1%-8% revenue decline in 2020 is relatively upbeat, in our view, given COVID-19 headwinds. Meanwhile, we think that most of the structural tailwinds behind ST’s chip businesses are firmly intact. We maintain our fair value estimates of EUR 27 and $30 per share for ST and continue to view shares as undervalued.

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Company Profile

Business Description

A merger between Italian firm SGS Microelettronica and the nonmilitary business of Thomson Semiconductors in France formed STMicroelectronics in 1987. STMicro is a leader in a variety of semiconductor products, including analog chips, discrete power semiconductors, microcontrollers, and sensors. STMicro is an especially prominent chip supplier into the industrial and automotive industries.

39, Chemin du Champ des Filles, Plan-Les-Ouates
Geneva, 1228, Netherlands
T +41 229292929
Sector Technology
Industry Semiconductors
Most Recent Earnings Mar 31, 2020
Fiscal Year End Dec 31, 2020
Stock Type
Employees 45,554