When the NASDAQ index added NXP Semiconductor (NASDAQ: NXPI) to the NASDAQ-100 index, the stock barely responded. Only when NXPI reported third-quarter results that included details on a share buyback did the stock soar into the double digits on November 1.
NXPI reminded investors that it was the #5 HPMS leader globally, #1 globally in auto semiconductor and #2 in the MCU area of IoT processing. It reiterated a goal of growing 1.5 times the market rate. Given the company’s strength in delivering secure identification, along with proven sales momentum, management will likely exceed its own forecast growth estimates. NXPI’s top-20 customers made up over 40% of 2017 revenue. Revenue, cash flow, and gross profit grow did not change much in 2016-17 but that is about to change.
Markets anticipate NXPI accelerating growth as its pivots the business. Its inflection point is an accelerating growth in chip sales in automotive.
Already, in Q3/2018, HPMS revenue grew 4% Y/Y (but fell 2% Q/Q) to $990M. This is up strongly from the $948 million last year. Secure connected grew 1% Y/Y to $717 million and Secure Interface and Infrastructure grew 5% Y/Y.
NXPI ended Q3 with $6.356 billion in debt and $1.944 billion in cash with cost of debt just 2.87%. As NXPI resumes another round of stock buying chances are good it bottomed. It may only go up from here.
