NXP Semiconductors Is a Stock You’ll Regret Not Buying

NXP Semiconductors (NXPI) has been facing short-term problems mainly due to Brexit. The market has recovered itself from Brexit influence, but NXP Semiconductors is still trading lower over the past few weeks. However, this produces a great buying opportunity for investors, as the company has a diversified semiconductor business. For several reasons, the company’s future looks bright and I think the recent sell off is a buying opportunity for long-term investors.

NXP Semiconductors have several major rivals in the semiconductor as well as chip manufacturing segment.
In the case of semiconductor business, AMD is the foremost rival of the company, and in the case of chip manufacturing business, Ambarella is the major rival of NXP.

AMD recently introduced its new graphics cards based on its new Polaris architecture, but some days after the launch of graphics card, it was found that the RX 480 have some over power drawing issues. This again proves the company’s habit of over promising and under delivering. However, NXP Semiconductors is aggressively focusing on a new market, but from a much sturdier position compared to AMD.

After partnering with its rival Freescale Semiconductor, the company has gained a lead in automotive computing. This sector was not so popular a few years before, but now, it has become the most important part of self-driving cars concept. Recently, NXP Semiconductors launched its new self-driving cars platform known as “BlueBox” that offers an overall solution to automotive firms developing and testing autonomous cars.

Moving on, Ambarella is a much smaller company as compared to NXP Semiconductors. Ambarella generates most of its revenue from the drones and action cameras markets. But, analysts expect Ambarella’s revenue to drop around 3 percent this year, whereas NXP’s sales are projected to surge 56 percent mainly due to the boost provided by the Freescale acquisition.

Moreover, the company has also planned to reduce its debt heavily which was added in the company’s financial book due to the Freescale merger. Although NXP Semiconductors is facing a few short-term headwinds, the company’s growing presence in the automotive sector is a great positive.

Weak Apple sales may keep a lid on the stock price for the next few months, but given NXP Semiconductors' growing presence in the automotive sector, I think the stock is a great pick for long-term investors. NXP Semiconductors is currently undervalued as it is trading at a P-E ratio of 18, and makes for a nice buy for long-term investors.
Published on Jul 25, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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