STMicroelectronics shares extend fall after Morgan Stanley downgrade

Investing.com – STMicroelectronics NV (NYSE:STM) (EPA:STMPA) shares extended losses on Friday after Morgan Stanley downgraded the stock to “Equal-weight” from “Overweight”. The downgrade comes on the heels of a weaker-than-expected guidance from the semiconductor company.

Analysts flagged a deeper-than-anticipated inventory correction in the industrial sector and softer-than-expected demand in the automotive market. These factors have led to a downturn in STMicroelectronics' business, resulting in underutilization of capacity and margin erosion.

The company has lowered its full-year revenue forecast to $13.2-$13.7 billion from the previous guidance of $14-$15 billion. Gross margin is also expected to decline to around 40% from the low 40% range.

“With a deep correction in industrials and declining autos, we see fiscal year 2024 sales and earnings per share down -23% and -59% Y/Y, respectively, to $13.4 billion and $1.83 (previously $14.39 billion and $2.41), which we see as evidence of a severe cyclical trough for STMicro,” analysts said. 

As a result of the revised estimates, Morgan Stanley has cut its price target for STMicroelectronics to €35 from €48.