NXP Semiconductor rises on UBS upgrade citing strong cash flows
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NXP Semiconductor (NASDAQ:NXPI) shares rose more than 1% on Tuesday as investment firm UBS upgraded the chip company, touting its strong cash position.
Analyst Francois-Xavier Bouvignies raised the firm's rating on NXP Semiconductor (NXPI) to neutral from sell, while raising the price target to $167, noting that even though shares have fallen roughly 30% over the past 12 months, the company's strong cash position should comfort investors.
"We would expect NXP cash flow management to be strong in a downturn due to its good track record," Bouvignies wrote in a note to clients.
Bouvignies noted that NXP's (NXPI) free cash flow has shown "strong outperformance" compared to its peers since 2012, a trend that is likely to continue for at least the next three years, given an estimated free cash flow margin of 27% compared to industry average of 24%.
The analyst added that NXP (NXPI) is likely to protect its margins even in a downturn, because of its "capex light/outsourcing strategy." The analyst also noted that the current share price implies revenue growth on a compound annual basis of just 6% to 7%, but EBIT margins of around 20% in perpetuity.
"Although our thesis around its lower EV content remains, we believe NXP might be more resilient in the current macro environment and we upgrade to Neutral," Bouvignies added.
Last month, NXP Semiconductors (NXPI) expanded its Matter portfolio with new, secure wireless MCUs.
Analysts are overwhelmingly positive on NXP Semiconductors (NXPI). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates NXPI a STRONG BUY.