Semiconductor stock STMicroelectronics is forming a cup-with-handle base, and is nearing a buy point. The company gained 11% since its earnings report in late January and is today's IBD 50 Stocks To Watch pick.
Switzerland based-STMicroelectronics specializes in semiconductors for amplifiers, auto devices, clocks, data converters and sensors. The products are used for artificial intelligence (AI) and wireless connectivity, lighting, motor control, power and energy, and in security products.
"The supplier to Tesla and Apple is enjoying strong semiconductor demand from automotive and industrial customers after shortages of chips hit the auto sector hard last year," according to a Barron's article.
STMicro rolled out new STM32U5 series microcontrollers in February, with increased performance, efficiency and longer runtimes.
The semiconductor company earns a high second place out of 31 stocks in the chipmaking industry group. The group ranks 69th out of 197 IBD industry groups, rising from the 115th spot four weeks ago.
Semiconductor Stock Approaches A Buy Point
STMicroelectronics stock is forming a long cup-with-handle base with 50.91 buy point. Note the cup is deeper than ideal. But the handle has better characteristics, including a 6% decline and light volume.
Shares popped 7.8% in heavy volume following a positive Q4 earnings report on Jan. 26. STM stock continued to rise, helping complete the right side of the base and form the handle. Shares have found support at the 21-day exponential moving average as the handle forms.
The semiconductor stock soared over 36% year to date, and outperformed its industry group's 15% gain.
STMicroelectronics Beats Q4 EPS Expectations By 16%
STMicroelectronics posted $1.32 Q4 earnings per share, an increase of 61% year over year. EPS gains were above 100% the previous three quarters. Quarterly sales grew 24% in Q4, slowing from 35% and 28% increases in the two prior quarters.
Full-year 2022 gross margin strengthened to 47.3% vs. 41.7% in 2021.
"FY22 (fiscal 2022) revenues increased 26.4% to $16.13 billion, driven by strong demand in automotive and industrial, and our engaged customer programs. Operating margin increased to 27.5% from 19.0% in FY21 and net income almost doubled to $3.96 billion," said Jean-Marc Chery, the company's president and CEO.
The company's first-quarter outlook, at the midpoint, is for net revenues of $4.20 billion for a year-over-year increase of 18.5%. It would be a sequential decline of 5.1%, he added. Gross margin is expected to be about 48%.
STMicroelectronics invested $3.52 billion in capital expenditures in 2022, and plans to invest $4 billion in 2023 for new microchip fabrication plants. The chip company invested 13.5% of its revenue in R&D.
Last year's $4.19 EPS nearly doubled, from $2.16 in 2021. Analysts project EPS of $4.05 this year, rising to $4.31 in 2024.
Award Winning And ESG Conscious
STMicroelectronics was named a Clarivate 2023 Top 100 Global Innovator.
Sixty-nine percent of its new products are classified environmental and socially responsible, and the company has committed to being carbon neutral by 2027.
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