Skip to main content

NEW YORK (TheStreet) -- Shares of STMicroelectronics (STM) - Get STMicroelectronics NV Report are down 3.94% to $9.02 in afternoon trading today as semiconductor stocks slump after SanDisk Corp. (SNDK)  cut its first fiscal quarter revenue forecast.

SanDisk, a flash storage solutions company, announced today that it expects its revenue for the first fiscal quarter, which will end on March 29, to be approximately $1.3 billion, depending on final sell-through results, compared to the previously forecasted revenue range of $1.4 billion to $1.45 billion.

The change in the first quarter revenue estimate is primarily due to "certain product qualification delays," lower than expected sales of enterprise products and lower pricing in some areas of the business, SanDisk said.

Semiconductor stocks are now down about 4% since Tuesday. Related stocks ON Semiconductor Corp. (ONNN) , and NXP Semiconductors (NXPI) - Get NXP Semiconductors NV Report are lower by almost 2% today.

Separately, STMicroelectronics recently said its quarterly dividend would be maintained at $0.10 per share over each of the next four quarters.

STMicroelectronics is a Switzerland-based semiconductor company that designs, develops, manufactures and markets a range of semiconductor products used in a variety of applications, including automotive products, computer peripherals, telecommunications systems, consumer products, industrial automation and control systems.

Scroll to Continue

TheStreet Recommends

Its product segments include sense and power and automotive products (SPandA) and embedded processing solutions (EPS). Some of its major customers include Apple (AAPL) - Get Apple Inc. Report, Cisco Systems (CSCO) - Get Cisco Systems, Inc. Report, Hewlett-Packard (HPQ) - Get HP Inc. Report, and Samsung (SSNLF) , among others.

The average recommendation of six brokers' estimates on STM is a 2.3, with a 2 rating representing an "outperform" and a 3 a "hold," according to data compiled by Reuters. The mean target price is $9.37.

TheStreet Ratings team rates STMICROELECTRONICS NV as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate STMICROELECTRONICS NV (STM) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the stock has experienced relatively poor performance when compared with the S&P 500 during the past year."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • STMICROELECTRONICS NV reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, STMICROELECTRONICS NV turned its bottom line around by earning $0.14 versus -$0.56 in the prior year. This year, the market expects an improvement in earnings ($0.37 versus $0.14).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 219.4% when compared to the same quarter one year prior, rising from -$36.00 million to $43.00 million.
  • 44.72% is the gross profit margin for STMICROELECTRONICS NV which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, STM's net profit margin of 2.35% significantly trails the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, STMICROELECTRONICS NV's return on equity significantly trails that of both the industry average and the S&P 500.
  • In its most recent trading session, STM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • You can view the full analysis from the report here: STM Ratings Report

Must Read: Warren Buffett's Top 25 Stocks for 2015