NXP Semiconductors Still Rules The Chip Throne

Dutch global chip giant NXP Semiconductors (Nasdaq: NXPI) was hit with a breakup last month: a highly anticipated deal to buy U.S. chip giant Qualcomm (Nasdaq: QCOM). No green light from China meant NXPI would be buying back $5 billion worth of shares. QCOM meanwhile will fork over $2 billion for the cost of the breakup. Shares stumbled roughly 6% fresh on the heels of the news. Yet, how does NXPI’s risk/reward look today?

Over half of the analysts stand bullish in NXPI’s corner. Let’s explore our market data- and see how the top experts on the Street are betting on the chip giant right now.

Stability Will Return

Needham analyst Rajvindra Gill (Profile & Recommendations) sees recovery ahead for NXPI despite the “knee-jerk reaction” from Wall Street. Yet, Gill remains bullish: “we believe it will stabilize as analysts reset estimates and fundamental investors begin to reevaluate the shares.”

As such, the analyst maintains a Strong Buy rating here and looks for NXPI stock to rally up to $130 (45% upside potential).

“Net, we calculate the company could earn $7.20 of 4.5% growth at 30.2% OM. The $5BN buyback could add $1.14-$-1.34 of incremental EPS. Moreover, in our view, the mix of revenue is much healthier than it was two years ago: auto and industrial end markets account for 67% of sales and the consumer orientated SIS segment is down to 6% of sales,” writes Gill.

NXPI Attracts Two New Bulls

Jefferies analyst Mark Lipacis (Profile & Recommendations) believes the QCOM breakup that sparked a sell-off in NXPI shares poses an enticing risk/reward profile to investors.

Accordingly, the analyst upgrades the stock from Hold to Buy while scaling back the price target from $127.50 to $125. Lipacis’ lowered price target still suggests he sees 39% in return potential ahead.

In Lipacis’ research note, he discusses three positive themes for the NXPI story: 1) robust long-term revenue growth 2) margin expansion, or the “Analag Renaissance,” and 3) capital return.