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.