When NXP Semiconductors N.V. (NASDAQ:NXPI) reported solid first quarter results, shares would have headed north of the $110 level. Unfortunately, an ill-timed President Trump tweet threatening higher tariffs against China put the NXPI stock rally on pause, and for good reason. NXP already pointed out a slowdown in China markets during the first quarter. Regardless of the outcome of trade talks, the macro headwind is already priced in its stock. With shares trading at a P/E of just 15.5 times, a forward P/E of sub-12 times, a share buyback, and a growth plan ahead, should investors jump on NXPI stock?
First, a disclosure: We had mixed results with NXPI stock on the DIY Marketplace. NXP and Qualcomm (QCOM) made money for members at first. When I added both stocks back, betting the deal would go through, both plays did poorly. Yet holding NXPI stock in the months that followed paid off. I believe the stock will offer positive returns in the next 12 months.
NXPI reported a loss of $0.07 GAAP as revenue fell 7.9% to $2.09 billion in the first quarter. For 2018, automotive sales topped $4.5 billion. Considered the number one ranked global automotive semiconductor supplier, its auto processing, ADAS radar solutions and digital clusters all grew market share. The company is clearly unfazed following Qualcomm's failure to buy the company out. By operating the business like it was another business day, NXP continued its strong revenue momentum in the automotive markets.
NXPI has solid IP, advanced products like the complete radar subsystem, which includes the 77 GHz front-end transceivers. Plus it has a vacuum processing engine and high-speed interconnect, all of which are tied together with its in-house software. The combination of superior hardware and high margin software should lead to bigger profits ahead.
Increasing Shareholder Returns
Thank you for your time in reading this article. For a limited time, I am inviting you to sign up for risk-free trial access to DIY (do-it-yourself) investing. This invitation will close after reaching capacity.
Please [+]Follow me for coverage on stocks like NXP Semiconductors, which was first introduced to DIY members. Click on the "follow" button beside my name.
