- While achieving an impressive Non-GAAP FCF margins rebound toward the record 12% and delivering shareholder value through strong share buybacks, the top line growth still has been lagging.
- There are signs the semiconductor industry may be bracing for a cyclical slowdown or at least a seasonal lull as customers minimize year-end inventories slightly more than other years.
- Thanks to proactive right-sizing, inventory buffers and higher share of outsourced production, margins should be more resilient in the next down cycle.
- Fairchild expects to repurchase more than 10% of its shares outstanding in 2014 and to continue returning 100% of its excess FCF in 2015 to shareholders.
- Fairchild’s stock offers a roughly 13% upside within 12 months with a $15 target price. Potential semiconductor industry slowdown and peak margins represent the main downside risks.