NXP Semiconductors Falls 7% in 3 Months: How to Play the Stock?

NXP Semiconductors NXPI shares have lost 6.7% in the past three months, underperforming the broader Zacks Computer and Technology sector’s return of 11.7%. Over the same time frame, it lagged behind its competitors in the semiconductor space, including Semtech SMTC and MACOM Technology Solutions MTSI. In the past three months, shares of SMTC and MTSI have rallied 53.4% and 36.9%, respectively.This underperformance can be attributed to the weakness in the automotive end market due to high-level inventory corrections among direct Tier 1 customers. Slowing momentum in the communications infrastructure end market due to broad-based inventory corrections is also negatively impacting overall financial performance. In the last reported financial results for third-quarter 2024, NXP Semiconductors’ top line of $3.25 billion declined 5.4% year over year and marginally fell short of the Zacks Consensus Estimate of $3.251 billion. NXPI reported non-GAAP earnings of $3.45 per share, which beat the consensus mark by 0.6% but declined 7% year over year.NXP Semiconductors N.V. Price and Consensus NXP Semiconductors N.V. price-consensus-chart | NXP Semiconductors N.V. QuoteNXPI’s Q4 Guidance Depicts Continued WeaknessFor the fourth quarter of 2024, NXP Semiconductors expects revenues to be $3.1 billion (+/- $100 million), indicating a year-over-year decline of 5-9% sequentially at the mid-point. The Zacks Consensus Estimate for the fourth quarter revenues is pegged at $3.10 billion, suggesting a year-over-year decline of 9.4%.NXPI expects the non-GAAP gross margin to be 57.5% (+/-50 bps). The non-GAAP operating margin is anticipated to be 35.1% at the midpoint.NXP Semiconductor anticipates non-GAAP earnings to be $3.13 per share. The consensus mark for the same is pinned at $3.14 per share, down by a couple of pennies over the past 30 days, suggesting a 15.4% year-over-year decline.In the fourth quarter of 2024, the Industrial and IoT end market is expected to be down by 20% from the year-ago quarter’s reported figure and down sequentially in the mid-single-digit percent range. Both sequentially and year over year, the Mobile end market is predicted to decline in the low single-digit percent range. Lastly, it anticipates the Communication, Infrastructure & Other end market will decline in a mid-single-digit percentage range, both sequentially and year over year.In conclusion, NXPI’s fourth-quarter guidance is a reflection of the macroeconomic weakness in North America and Europe, partially offset by China's strength. The company expected a cyclical rebound in the second half of 2024, but it hasn't happened. Tier 1 customers seem to be taking a very cautious approach to their inventory positions as a result of the soft and unpredictable demand environment.Innovative Portfolio to Aid NXPI’s ProspectsNXPI is expected to gain traction through its recent product launches, which facilitate user experiences across its end markets.NXP Semiconductors unveiled the Trimension SR250, the first single-chip solution in the market to combine secure-ranging and short-range UWB radar with on-chip processing capabilities. This is the next big step in NXP's efforts to create an automated and anticipatory world that will allow for a wide range of new user experiences based on motion, location, or presence detection in consumer or business IoT applications.The Trimension SR250 enables new use cases based on UWB mapping, human or object detection and secure positioning by combining angle-of-arrival calculations, secure ranging and low-power short-range UWB radar operating at 6-8.5 GHz.The latest launch to NXP Semiconductors' i.MX 9 series of applications processors, the i.MX 94 family, which is intended for telematics, industrial control, programmable logic controllers, industrial and automotive gateways, and building and energy control is a notable development.The i.MX 94 family assists designers in navigating this increasing complexity by combining communications, safety and real-time control features into a single SoC. This ensures optimal end-to-end performance when coordinating real-time communication and actions. For both industrial and automotive applications, the integrated 2.5 Gbps Ethernet TSN switch provides highly configurable and secure communications with extensive protocol support.Rich Clientele Base to Uplift NXPI’s ProspectsNXP Semiconductors and GlobalFoundries GF announced a partnership to advance next-generation solutions for a variety of end markets, such as smart mobile devices, IoT and the automotive industry. This partnership maximizes the power, performance and time-to-market of NXP's solutions by utilizing GF's global manufacturing footprint and 22FDX® process technology platform. The establishment of a 60:40 manufacturing joint venture between NXPI and Vanguard International Semiconductor is a significant step. Vanguard's biggest shareholder is TSMC, with whom NXPI already has alliances in Singapore and Europe.Phase 1 production of 55,000 wafers per month will be achieved by this new joint venture, VisionPower Semiconductor Manufacturing Company, which will build a 300 mm machine in Singapore.Between 2024 and 2028, NXP Semiconductors is anticipated to invest $2.8 billion, with 2025 marking the peak investment period.Zacks Rank & ValuationThough the long-term prospects of NXP Semiconductors seem bright considering its portfolio strength and rich clientele base, the ongoing macroeconomic challenges and persistent weakness across multiple end markets warrant caution in the near term. NXPI shares are not cheap as suggested by a Value Score of D.NXPI carries a Zacks Rank #4 (Sell), which implies new investors should stay away from the stock currently and existing investors should sell the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Semtech Corporation (SMTC): Free Stock Analysis Report NXP Semiconductors N.V. (NXPI): Free Stock Analysis Report MACOM Technology Solutions Holdings, Inc. 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