We recently published a list of the 10 Most Profitable European Stocks to Invest In. In this article, we are going to take a look at where NXP Semiconductors N.V. (NASDAQ:NXPI) stands against the other profitable European stocks to buy.
How Could Trump’s Trade Tariffs Impact Europe?
After the U.S. Presidential elections, the global economies might face trade tariff tribulation as the Trump administration is expected to accelerate the trade war. China and Europe are especially expecting Trump’s potential trade policies that can heat the trade war. In addition, the rising perturbation around Germany’s upcoming snap election is a sign of worry for investors. Since the US elections, European stocks have retreated, outflows have increased, and the euro has slid against the U.S. dollar.
According to the European Central Bank’s chief economist, Philip Lane, if global trade feels more of a burden, the global economic output would suffer a sizable loss. “Trade fragmentation entails sizeable output losses,” said Lane, during a speech in Amsterdam. Lane anticipates a potential hit on the global output at between 2%, in case of partial trade restrictions, and almost 10% if a full ban is imposed.
Furthermore, the leading banks including JPMorgan, Goldman Sachs, and Citi have pointed out the euro as one of the most vulnerable currencies to Trump’s tariff agenda. Considering the region’s manufacturing exports and dependence on China, Europe could be exposed to trade tariff consequences.
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The United Kingdom’s inflation rate fell noticeably to 1.7% in September, just below the ECB’s 2% target for the first time since April 2021. On November 7, the Bank of England announced the rate cut by 25 basis points, bringing its key rate to 4.75%. The U.K.’s central bank has cut rates by a combined 75 basis points to 3.25% in 2024 so far. Investors expect the central bank to further cut rates during the next meeting in December.
Europe’s stock market has some interesting stocks that investors would want to keep in their portfolios to avoid too much concentration on U.S. assets. The pan-European STOXX Europe 600 has plunged nearly 2% since the U.S. elections, however, the index is up 11% over the last year, as of November 23.
With that, let’s take a look at how profitable NXP Semiconductors N.V. (NASDAQ:NXPI) has been over the years.
High angle view of a semiconductor chip against an array of electronics components.
Our Methodology
To compile our list of the 10 most profitable European stocks to invest in, we scanned European stocks through Finviz Screener using two indicators. We shortlisted the stocks with a minimum net income of $1 billion or more in the trailing twelve months (TTM) and with a 5-year net income compound annual growth rate (CAGR) of over 15%. From that list, we narrowed our choices to the 10 stocks that analysts see the most upside to. The list is ranked in ascending order of analysts’ average upside potential, as of November 22.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
NXP Semiconductors N.V. (NASDAQ:NXPI)
Upside Potential: 18%
5-Year Net Income CAGR: 46.27%
TTM Net Income: $2.71 Billion
NXP Semiconductors N.V. (NASDAQ:NXPI) is a Netherlands-based holding company that makes and sells various products related to semiconductors. The company offers a wide range of microcontrollers and processors optimized for AI and machine learning applications in automotive, personal security and identification, mobile communications, and IoT industries, among others.
Although the demand across the automotive and IoT market is low, the company’s long-term policy is adjusted according to the changing circumstances. The long-term strategy for NXP Semiconductors N.V. (NASDAQ:NXPI) is to succeed in the fastest-growing secular end markets of automotive and industrial IoT. During Q3, the company posted revenue in line with its projection of $3.25 billion.
NXP Semiconductors N.V. (NASDAQ:NXPI) has a diversified portfolio which allows the firm to be flexible. Moreover, NXP’s long-term planning to tackle the market shortcomings and its growth over the years is a testament to its business.
On November 22, Wells Fargo assigned an Overweight rating to NXPI and set a price target of $250. NXP Semiconductors has a competitive positioning and diverse manufacturing in the semiconductor market, placing it among the most competitive semiconductor firms in the market.
Overall, NXPI ranks 8th on our list of the most profitable European stocks to invest in. While we acknowledge the potential of NXPI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NXPI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
