STMicro Raises 3Q, FY Guidance on Improved Market Conditions

(Bloomberg) -- STMicroelectronics NV, the chipmaker that supplies Apple Inc. and Tesla Inc., raised both its third quarter and full-year revenue forecasts as it sees “improved market conditions” through the end of 2020.

The company said third-quarter revenue will be $2.45 billion with a gross margin of 36%. The average estimate was $2.26 billion and 35.36% respectively, according to data compiled by Bloomberg.

STMicro raised its full-year net revenue target to between $9.25 billion and $9.65 billion, from $8.8 billion to $9.5 billion. Growth in the second half of the year would be in the range of $610 million to $1.01 billion, it said.

Shares of STMicro were up 4% to 27.79 euros at 10:37 a.m. in Paris.

Key Takeaways

• “We expect this growth to be driven by engaged customer programs, new products and improved market conditions,” STMicro Chief Executive Officer Jean-Marc Chery said of third-quarter estimates in a statement.
• Increased U.S.-led restrictions on Huawei equipments will impact STMicro in 4Q, Chery said on a call with analysts, which he said is included in the company’s forecast.
• For Chery, 2Q “is confirmed to be the bottom” in the slowdown generated by Covid-19, including in its legacy automotive branch.
• The inventory, which analysts were closely monitoring, was 129 days at the end of the second quarter; at the end of the third quarter it will decrease to 115 to 120 days, Chery said, and at year end to 95 to 100 days.
• Gaming and wearables will support sales of consumer electronics, he said.
• The company reported second-quarter revenue of $2.1 billion.
• Gross margin was 35%.
• Revenue compares with average analyst estimates of $2 billion and gross margin of 34.65%.
• Read more analyst reaction here.

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• Rival Texas Instruments Inc. projected revenue in the current quarter that topped analysts’ estimates; Dutch chip equipment firm ASML beat analysts expectations for the third quarter and insisted 2020 will be a “growth year.”
• Analog Devices Inc. is close to an all-stock agreement to acquire Maxim Integrated Products Inc., according to people familiar with the matter. The deal would value Maxim at more than its current market capitalization of roughly $17 billion.
• STMicro’s share price underperformed compared with analog peers. Credit Suisse and Liberum wrote that concerns around its Huawei Technologies Co. exposure is partly responsible for this.

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