Morgan Stanley upgrade lifts NXP

At 12x 2015E EPS, NXP (NXPI +2%) trades at a "25% discount to peers and tech," argues Morgan Stanley's Craig Hettenbach, lifting shares to Overweight.

After talking with OEMs and rivals, Hettenbach is upbeat about NXP's ability to address e-government (smart ID card), banking, and embedded secure applicaions, aided by its broad secure microcontroller portfolio.

He sees NXP's ID chip business growing at a double-digit clip, reaching 30% of sales in 2016, and sees a strong 2H rebound in NFC chip sales even if Apple orders don't materialize. MS forecasts the market for chip-based payment cards will see a 20% CAGR through 2018, growing to $1.1B.

NXP's ID chip sales rose 13% Y/Y in Q4 to $329M, and accounted for 26% of revenue.

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