On Monday, UBS increased its price target for Infineon (OTC:IFNNY) Technologies AG (IFX:GR) (OTC: IFNNY) to €46.00, up from €45.00, while reaffirming a Buy rating on the stock. The firm's analysis suggests confidence in Infineon's position as a leading choice within the sector, citing several reasons for the positive outlook.
Infineon is anticipated to surpass the growth of the automotive semiconductor market over the next two years, primarily due to its significant exposure to the electric vehicle (EV) segment. The company's market share gains in microcontroller units (MCU) are also expected to be sustainable, leading to a forecast of low double-digit revenue growth in the automotive segment, compared to a high single-digit percentage market growth.
The emergence of artificial intelligence is another factor driving UBS's optimistic stance. AI's influence on increasing server power demands is likely to benefit Infineon. A new bottom-up model estimates that data centers could account for a low double-digit percentage of Infineon's revenues by the end of the decade, a substantial increase from the current 4%.
Additionally, Infineon's valuation appears attractive to UBS. The stock is trading at approximately 13 times the projected earnings for 2025, which is below the historical average price-to-earnings (PE) ratio of 19 times. This valuation, combined with the company's growth prospects in key technology areas, supports UBS's Buy rating.
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