Stmicroelectronics: Morgan Stanley judges that STMicroelectronics shares risk further fall

(BFM Bourse) – The American bank lowered its advice on the stock to “underweighting” this Monday, equivalent to “sell” in its nomenclature. Morgan Stanley believes that the automotive segment will suffer again next year.

STMicroelectronics is suffering on the stock market in 2024. The Franco-Italian semiconductor group has suffered the second biggest drop in the CAC 40 since the start of the year (-45.7%), following Edenred (-46%). The group had to face weak momentum in its various segments, particularly in the automobile sector, and had to lower its annual targets on several occasions.

The company did it again last week, after delivering disappointing fourth-quarter guidance.

This Monday, Morgan Stanley warned that the bad patch was likely to last for several more months. The American bank thus lowered its advice on the action to “underweighting” (equivalent to “sell” in its nomenclature) against “online weighting” previously, while cutting its price target to 20 euros, against 35 euros previously. This new target assumes a potential decline for the stock of nearly 20%, at Friday's closing price.

On the Paris Stock Exchange, STMicroelectronics shares dropped 2.3% around 3:10 p.m., showing one of the biggest declines in the CAC 40.

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Investor day planned for the end of the month

The American bank's change of heart is mainly motivated by automobiles. “We believe analyst expectations for the automotive segment for fiscal 2025 are too high and will need to be lowered; we model a decline of around 6% (versus a previous forecast of 12% growth) in the automotive sector”, warns the establishment.

“Given automotive's already weaker-than-expected performance in the third quarter and our view that automotive semiconductors will decline in 2025 (…) we see much of this deterioration in automotive fundamentals automotive will continue for much of 2025,” continues Morgan Stanley.

Morgan Stanley also expects auto weakness to result in still low margins for the company in 2025.

STMicroelectronics will hold an investor day on November 30. “We believe that comments on pricing, new products, cost restructuring and long-term goals will be the focus of investors,” explains Morgan Stanley.

Julien Marion – ©2024 BFM Bourse