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NXP Semiconductors Target to $125

NXP Semiconductors (NXPI) dropped over 4% after management stated that they have already spent $3.7 billion of the $5 billion dollars on buybacks from the Qualcomm (QCOM) breakup. Many investors thought that they haven’t or used very little of the buyback since there was never a public announcement until now. The stock price ended Tuesday below $90 which is a very nice buy level. On the same day, Credit Suisse gave the stock a target of $125. This is a 38.9% gain if their analyst is correct. Today, the stock is went below $86 as they received a downgrade by Stifel analysts for the entire industry of analog and mixed-signal semiconductors. This is a great buying opportunity for a short-term issue that the analysts are seeing. Remember, NXP Semiconductors’ chips are in both Apple and Samsung phones. It doesn’t matter who wins the phone industry for them. They have chips in both.

The CEO of NXP Semiconductors and President was on Mad Money with Jim Cramer on Tuesday. He had sold millions of dollars of stock when the stock was over $120 per share. He announced that he was buying at these levels at $90 including his CFO was buying their stock as they believe the company is undervalued. He also showed a processor that integrates with the cloud and internet to take advantage through edge processing. NXPI’s largest customers also include Garmin, Continental, and many car manufacturers since their chips are on the sensors of the cars.

I am long this stock and I believe it will do well in the future. The technicals do indicate that the stock could go down further for those that wish to be more conservative but don’t wait too long!

NXP Semiconductors

NXP Semiconductors (NXPI) was supposed to be purchased by Qualcomm (QCOM) for a stock share price of $127.50.  It was announced yesterday that if China does not authorize the merger then Qualcomm would walk on the deal and give NXPI a $2 billion break up fee and cancel the merger.  Today, China has not said anything and Qualcomm is walking.

NXP Semiconductor will soon have an extra $2 billion in its bank account.  The current rumor is that the extra money will be used for a big $5 billion buyback or even a special dividend.  Either way, it is great for shareholders especially since the stock has plummetted from over $120 to now an undervalued price at $91.

There is certainly plenty of volatility and even a chance that the stock price will go further down.  However, for the long-term investor, this is a great value.  Yahoo analysts give an average EPS for next year at 7.72.  This is a PE of 11.78 at the current price.  This price is indeed a bargain.

There is plenty of growth moving forward for this company.  In June, NXP Semiconductors introduced semiconductors for use in high powered RF products for 5g networks.  The company also is creating a new line of chips that make it easier for companies building AI tools.  If you just look at the present-day, their embedded chips are already used in factories and automobiles.

With a strong base of current customers using their technologies and a nice set of future chips that will grow the company in the future, there is plenty to get excited about with NXP Semiconductors.  I see this stock as a purchase below $92.  I also believe it will make a nice sell at any price at $120 which should happen in 2-3 years.

Disclosure: I am long NXPI and I purchased today.