Weak sales in personal computers put a damper on leading chip makers like Intel (INTC), Micron Technology (MU), Advanced Micro Devices (AMD), and NVIDIA Corporation (NVDA). Even for smart phone chip makers, which include Qualcomm (QCOM) , Broadcom (BRCM) saw shares drop too.
See also: Semiconductor Stocks Hedge Funds Are Buying
It is difficult for investors to make money in companies that fall as the cycle moves on the downswing of things. Companies that are able to provide a unique and differentiated product in the sector they operate in can outperform.
NXP Semiconductor (NXPI) is a company that managed to grow product revenue by 15% compared to last year. NXP managed to grow despite the weak environment, helped by design wins in mobile and strength in the identification (“ID”) market. In the last quarter, the ID business contributed to 275 million in revenue.
NXP shipped more than 1 billion SmartMX-based products, which is used for ePassport solutions. NFC-based mobile transactions are expected to keep growing worldwide. In the last quarter alone, the company shipped 100 million NFC controllers.
Valuation
NXP traded recently at around $24, giving the company a Forward P/E (or “POP”) of 10. The company reduced its debt by $202 million last quarter, and is buying back $500 million in debt due in 2018. The company earned $542 million in non-GAAP profit, up 7% from the previous quarter. At the end of the quarter, NXP held $702 million in cash.
NXP has a market capitalization of $5.9 billion and holds $3.58 billion in debt.
Guidance
NXP forecasts earning $0.41 to $0.53 per share in non-GAAP earnings.
Conclusion:
NFC and ID technology is continuing to grow despite weakness in the semiconductor sector. Its utilization rate is healthy, at above 91%.
Further Research: Companies mentioned in this article
1. NXP Semiconductors NV (NXPI, Earnings, Analysts, Financials): Provides mixed signal solutions and semiconductor components primarily in Japan, Europe, South Korea, Rest of Asia Pacific, and the Americas. Market cap at $6.42B, most recent closing price at $25.69.
2. Intel Corporation (INTC, Earnings, Analysts, Financials): Engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Market cap at $110.37B, most recent closing price at $22.06.
3. Micron Technology Inc. (MU, Earnings, Analysts, Financials): Engages in the manufacture and marketing of semiconductor devices worldwide. Market cap at $5.81B, most recent closing price at $5.71.
4. Advanced Micro Devices, Inc. (AMD, Earnings, Analysts, Financials): Operates as a semiconductor company in the United States, Japan, China, and Europe. Market cap at $1.49B, most recent closing price at $2.10.
5. NVIDIA Corporation (NVDA, Earnings, Analysts, Financials): Provides visual computing, high performance computing, and mobile computing solutions that generate interactive graphics on various devices ranging from tablets and smart phones to notebooks and workstations. Market cap at $7.74B, most recent closing price at $12.49.
6. QUALCOMM Incorporated (QCOM, Earnings, Analysts, Financials): Engages in the development, design, manufacture, and marketing of digital wireless telecommunications products and services. Market cap at $101.01B, most recent closing price at $59.30.
7. Broadcom Corp. (BRCM, Earnings, Analysts, Financials): Designs and develops semiconductors for wired and wireless communications. Market cap at $17.74B, most recent closing price at $31.45.
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