By all reports, NXP Semiconductors (NASDAQ:NXPI) had a very good quarter recently. It turned in some terrific numbers for both earnings and revenues that saw levels well above what was forecast for the company, and there are even some positive notes going into the company's immediate future. Despite this, it slipped in recent trading, and as it turns out, there's a perfectly good reason that happened.
Frontloaded Optimism
The raw news was excellent for NXP Semiconductors, who turned in wins on both revenue and earnings fronts. Earnings came in at a healthy $1.08 per share. That meant the company brought in $309 million in the quarter, which compares excellently to not only estimates, but also to the fourth quarter totals from a year prior, which came in at $114 million, about $0.40 per share.
Revenue, meanwhile, did even better. The company brought in $2.51 billion, which beat not only the expected total of $2.46 billion, but also the figures from the previous year's quarter, which came in at $2.3 billion.
Even better news came from a breakdown of figures, which revealed that there was no one particular portion of NXP Semiconductors' business that was driving totals. Automotive sales were up not only 24% for the quarter, but the full year figure was up 9%. A quarter-to-quarter comparison of industrial and Internet of Things (IoT) applications found some weakness—a 1% reduction—but a gain was found in the year-to-year comparisons, coming in at 23%. Similar gains were spotted in mobile sales, as well as commercial infrastructure and other sales.
So why the slide seen in after-hours trading? As it turns out, the gains normally associated with an earnings report had already come in. While the company lost as much as 2.3% in after-hours trading, the company had gained 6.9% the day before the report was released. The gains were posted in anticipation of the report, which means that the losses were likely connected to profit-taking.
Analysts Starting to Lose Faith?
The broader analyst pool, based on our latest research, is currently in favor of the company, but sentiment has been slipping for the last six months.
The company currently has a consensus rating of “buy”, as it has for that six month span, but the ratios have been sliding slightly in that whole time. Six months ago, the company's ratings were comprised of five “hold”, 16 “buy” and one “strong buy” rating. Three months later, the company brought in its first “sell” rating, and also added a new “buy” rating. Things really changed a month ago, as the company had one “sell” rating, six “hold”, 15 “buy” and one “strong buy”. Now, today, we have one “sell”, seven “hold”, 15 “buy” and one “strong buy.” Thus you can see how sentiment has grown increasingly bearish over the last six months, if very slowly.
The price target, meanwhile, has done nothing but climb. Six months ago, it was $128.61, which rose to $148.23 three months later. A month ago, it was at $152.28, and today, it sits at $162.63, which is actually the first time that downside potential has been seen for the company. This may not mean so much, though, as movement so far this year has heavily featured boosted price targets, most of which were hikes into the $200 range.
Sticking With a Winner
Essentially, everything an investor needs to feel good about the future of NXP Semiconductors is sitting right there. The company had an excellent quarter on the strength of a diversified product base that covers a wide range of use cases, from mobile devices to cars and even IoT applications. Sure, it slipped a bit in premarket trading, but there was a huge run-up ahead of that trade, so for the company to give back a bit in share prices isn't that strange at all.
In fact, certain points of view would suggest that the recent slip is actually a ready-made entry point for new investors to get in. This is a company that, by most available reports, is making a lot of headway in several market sectors, including smart city development and self-driving car operations. These are fields with substantial growth potential, and getting in now may allow investors to have a piece of that market to themselves. Granted, NXP Semiconductors is likely to have competition in that space—ON Semiconductors (NASDAQ:ON) comes immediately to mind—but considering the sheer number and range of use cases, it's a safe bet everyone will find some market here.
Don't let the slight slide in NXP Semiconductors throw you; there's plenty of potential positive development still connected with this company.
Companies in This Article:
