NXP Semiconductors slips as concerns remain even after strong Q2, guidance
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NXP Semiconductors (NASDAQ:NXPI) shares slipped on Tuesday even after the company posted a strong second-quarter and guidance, though several analysts noted that investors have concerns about the potential for slowing demand.
Bank of America analyst Vivek Arya, who has a buy rating and $190 price target on NXP Semiconductors (NXPI) shares, noted investors are likely to be cautious about automotive and industrial sales beyond the third-quarter as "caution remains around the disconnect between emerging consumer/cloud yellow-flags and infrastructure resilience."
Additionally, there were also concerns that the company ended the quarter with a record inventory level, at $1.5B, up 12% sequentially. This could be the result of over-ordering and future headwinds, even as the level of inventories of 94 days is in-line with the company's target of 95 days, the analyst warned.
"While NXPI noted demand in core markets is exceeding supply, we look for commentary pertaining to Q4/2023 visibility, and thoughts on inventory positioning," Arya wrote in a note to clients.
NXP (NXPI) shares fell slightly more than 2% to $170.38 in premarket trading, ahead of the company's 8 a.m. conference call to discuss the results.
Arya noted that margins for NXP (NXPI) have been "robust," but if a downturn were to happen, there could be some downside risk. 
"Margins have benefitted from improved mix and utilization, but management has previously acknowledged [gross margin] expansion could plateau in the medium-term," the analyst wrote, noting that gross margin guidance of 57.8% is near the high-end of the company's long-term target of between 55% and 58%. 
In addition, Arya noted that NXP's (NXPI) stock buyback program during the quarter slowdown, at just $2M, compared to $550M in the prior quarter. 
UBS analyst Francois-Xavier Bouvignies, who has a sell rating and a $160 price target on NXP (NXPI), noted that automotive and industrial and internet of things were the strongest segments, while mobile was slightly weaker. 
"Despite overall solid results, we believe the market will focus on order trends and how it might impact revenues in [2023]," Bouvignies wrote.
Last week, Citi tu positive on NXP (NXPI), noting that the rally in semiconductor stocks over the past several trading sessions could last into August, âas investors are "almost universally bearish" on the group.