NXP Semiconductors (NXPI) Stock Trades Down, Here Is Why

Adam Hejl /
2024/01/04 11:36 am EST

What Happened:

Shares of chip manufacturer NXP Semiconductors (NASDAQ: NXPI) fell 5.2% in the pre-market session as auto-related semiconductor stocks experienced a decline after auto-chip maker Mobileye provided preliminary estimated financial results for Q4'2023 and FY 2024, which fell below Wall Street's expectations. Mobileye cut its Q4'2023 revenue guidance to a range of $634 million to $638 million, falling below both its initial forecast ($623 million to $648 million) and analysts' consensus estimates. Looking ahead, the company provided FY'2024 revenue guidance of $1,830 million to $1,960 million, below market expectations. For the first quarter of FY'2024, it expects revenue to drop about 50% from a year earlier. 

The weak outlook was attributed to "excess inventory" built up by Mobileye's Tier 1 customers. Management elaborated, stating, "Based on our discussions, we understand that much of this excess inventory reflects decisions by Tier 1 customers to build inventory in the Basic ADAS category due to supply chain constraints in 2021 and 2022 and a desire to avoid part shortages, as well as lower than-expected production at certain OEM's during 2023." Moving on, Mobileye expects this excess inventory to be largely consumed in Q1 2024, leading to lower volume in its EyeQ® SoC business and a temporary hit to profitability. 

Overall, the weak outlook signals potential challenges for semiconductor stocks in the near term.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy NXP Semiconductors? Access our full analysis report here, it's free.

What is the market telling us:

NXP Semiconductors's shares are somewhat volatile and over the last year have had 4 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 8 months ago, when the stock gained 5.1% on the news that the company reported first-quarter results that beat analysts' revenue, and earnings per share (EPS) estimates, although free cash flow missed and inventory levels increased. Revenue and EPS guidance for the next quarter exceeded the Consensus estimates, with EPS coming in a robust 10% ahead of expectations. Overall, it was a solid quarter for the company.

At $210.12 per share NXP Semiconductors is trading 9.8% below its 52-week high of $232.93 from December 2023. Investors who bought $1,000 worth of NXP Semiconductors's shares 5 years ago would now be looking at an investment worth $2,785.

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