4. NXP Semiconductors N.V. (NASDAQ:NXPI)
Number of Hedge Fund Holders In Q3 2024: 44
NXP Semiconductors N.V. (NASDAQ:NXPI) is a Dutch semiconductor company that makes and sells chips such as microcontrollers, power amplifiers, communications processors, and others. Although semiconductor stocks have performed well in the artificial intelligence era, NXP Semiconductors N.V. (NASDAQ:NXPI)’s shares are down 0.36% year-to-date. This is because the firm relies heavily on the automotive industry for its revenue. As of H1 2024, 55.6% of the firm’s revenue came from the automotive industry and it marked a slight 4.4% annual drop as car manufacturers slowed down production due to sluggish global economic activity. NXP Semiconductors N.V. (NASDAQ:NXPI) is also hampered by the fact that it operates chip production facilities that require high utilization rates to reduce capital expenditure and spread costs. However, the firm’s industry position coupled with the fact that establishing fabs is a cost and technology-intensive process means that NXP Semiconductors N.V. (NASDAQ:NXPI) enjoys a competitive moat that can help the firm once the automotive industry recovers.
NXP Semiconductors N.V. (NASDAQ:NXPI)’s management commented on the outlook of its different business divisions during the Q3 2024 earnings call. Here is what they said:
“Relative to our earlier expectations, we are taking a more conservative stance for quarter four, hence, we will also aim to hold channel inventory approximately flat sequentially at 1.9 months or about eight weeks.
This is because we began to see increasing weakness in the Industrial and IoT market already during quarter three, as well as an unexpected contraction in manufacturing PMI below 50 across all regions except China. Furthermore, we find ourselves exposed to a broad slowdown of European and North American automotive OEM outlooks for 2024, only partially compensated by the aforementioned strength in China automotive. This leads to more stringent inventory reductions at our Tier 1 customers below the natural end demand. So at the midpoint, we anticipate the following trends in our business during quarter four. Automotive is anticipated to be down in the high single-digit percent range versus quarter three, 2023. Excuse me, versus quarter four 2023 and down in the mid-single-digit percent range versus quarter three 2024.
Industrial and IoT is expected to be down by 20% versus quarter four 2023, and down in the mid-single-digit percent range sequentially. Mobile is expected to be down in the low single-digit percent range both versus quarter four of 2023 and sequentially. And finally, communication, infrastructure, and other is expected to be down in the mid-single-digit percent range both versus quarter four 2023 and sequentially. In summary, our guidance for the fourth quarter reflects broader macro weakness in Europe and North America, only partially compensated by strength in China. The cyclical rebound, which we had anticipated for the second half of 2024 has not materialized. The soft and uncertain demand environment appears to be causing the Tier 1 customers to take a very cautious stance on their inventory positions.”
