Mizuho cuts price targets for auto chip stocks on softer trends

Investing.com -- Mizuho Securities has adjusted its outlook for auto chip stocks, cutting price targets for key players amid signs of weaker-than-expected demand in both the auto and industrial sectors.

The investment bank highlights a weaker-than-seasonal December quarter and continued inventory challenges, prompting it to lower expectations across the board.

“We have lowered our Analog DecQ top lines by 2-5% given slower demand and increased inventory,” Mizuho analysts stated, specifically targeting companies like Allegro MicroSystems, Microchip Technology (NASDAQ:MCHP ), NXP Semiconductors (NASDAQ:NXPI ), ON Semiconductor (NASDAQ:ON ), and Texas Instruments (NASDAQ:TXN ).

Following its supply chain checks, Mizuho pointed out several key takeaways, including that auto and electric vehicle (EV) demand remains “softer than seasonal into DecQ, with 2025E slower than consensus,” and soft industrial demand.

Moreover, demand for China renewables and EVs is strong but domestic analog supply “increases competition for global incumbents,” analysts said.

For Allegro MicroSystems, the price target was slashed from $32 to $26, with estimates for the December quarter lowered from $207M/$0.14 to $200M/$0.12. 

“We continue to see ALGM winning in both ICE and xEV, as well as with new DC opportunities,” Mizuho noted, maintaining its "Outperform" rating.

Microchip Technology’s price target was reduced from $100 to $95, as the firm cut its December quarter estimates from $1.21B/$0.51 to $1.15B/$0.46. Still, the analysts reiterated their Outperform rating, saying that they see MCHP “returning to growth in 2025E after multiple quarters of revenue weakness.”

For NXP Semiconductors, Mizuho cut the price target from $315 to $290, reducing December quarter revenue estimates from $3.36B/$3.61 to $3.29B/$3.61.

ON Semiconductor, which Mizuho sees as well-positioned due to its exposure to EV and renewable energy markets, saw a more modest price target reduction from $87 to $85.

“ON continues to benefit from a strong EV platform and emerging DC opportunities,” the note highlighted.

Texas Instruments, while maintaining stable performance in the analog space, had its price target raised slightly from $190 to $200. Despite this, the firm kept its "Neutral" rating.

Source: Investing.com