"We expect revenue growth 3 pts below consensus next year, driving material earnings misses and forcing management to drop or postpone their 10% operating margin target," writes Bernstein's Pierre Ferragu, while downgrading STMicroelectronics (STM -2.2%) to Underperform.
Ferragu sees STM's auto, industrial, and microcontroller growth slowing a bit, as 32-bit microcontroller competition grows and auto growth shifts to regions with less chip content per car. Power management chip growth is expected to pick up due to smartphone demand.
More importantly, he expects STM's digital convergence group (DCG) to grow "well below management's ambitions" due to a long-term decline in set-top chip sales, and predicts the company's MEMS business (hasn't seen growth since 2011) will witness further share losses. He notes Bosch recently won an iPhone MEMS socket at STM's expense.