Capital Allocation

PREMIUM

Analyst Note

| Brian Colello, CPA |

Narrow-moat STMicroelectronics reported healthy second-quarter results and provided investors with an upbeat forecast for the rest of 2021. Importantly, the company has an 18-month backlog of chip orders, which should support demand in 2022, and ST is racing to expand capacity to fulfill these orders. Given the bright near-term outlook and the secular tailwinds around broad-based semiconductors, such as rising chip content in automobiles, we are raising our fair value estimates to EUR 37 from EUR 33 and to $44 from $40 for the firm’s U.S. shares. Shares appear slightly undervalued to us.

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.

Sector Technology

Industry Semiconductors

Most Recent Earnings Jun 30, 2021

Fiscal Year End Dec 31, 2020

Stock Type

Employees 46,016

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