Last week, NXP Semiconductors (NASDAQ:NXPI) proved once again why it is a stock to buy and hold forever. The company pre-announced preliminary third-quarter results. Revenue is above the midpoint of the company consensus.
NXP now expects revenue of $2.2 billion in Q3. Non-GAAP Gross profit will come in at $1.135 billion. The company’s CEO, Kurt Sievers, said that demand across all of its end markets improved. Distribution channels are also better. This led to higher revenue than expected and improved gross margin.
In the last quarter, NXP did not post great results, yet the shares did not fall. Investors correctly expected the company’s business would snap back. This also implies that automotive firms are resuming their developments in autonomous driving. Increasing the volume of technology in vehicles will continue lifting NXP’s long-term growth prospects.
Investors accumulated shares in the top electric vehicle manufacturers in the last few months. Tesla (NASDAQ:TSLA) and Nio (NYSE:NIO) traded at new highs recently as they lead the revolution in next-generation EVs.
Risks
NXP offers a stock-based compensation that seems very high. It increased by 22.5% year-on-year for the quarter ended June 30, 2020. NXP is also aggressive with the use of non-GAAP. For example, its operating GAAP income is $47 million. On a non-GAAP basis, it is $444 million.
Continue holding NXPI shares.
