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TSMC's soft forecast means that you should avoid this chip stock

Published 04/19/2024, 07:12 AM
Updated 04/19/2024, 07:14 AM
© Reuters.  TSMC's soft forecast means that you should avoid this chip stock

Analysts at Citi said in a note this week that the negative results from Taiwan Semi (TSM) and Continental will negatively impact one stock due to its exposure to a certain market.

The bank expects the auto sector correction to negatively impact analog names, especially NXP Semiconductors (NASDAQ:NXPI), as 56% of NXPI's sales are exposed to the auto end market.

TSMC lowered its auto outlook in 2024. The company mentioned that the weaker auto demand is the primary reason for lowering their overall semiconductor (excluding memory) market outlook to 10% year-on-year from prior expectations of more than 10% year-on-year.

Meanwhile, Continental announced preliminary 1Q24 sales and EBIT lower than consensus due to auto weakness. Auto sales were 2% below consensus and EBIT margin was -4.3%, well below the consensus of -1.8%.

Analysts note that TSM is NXPI's major foundry, and Continental is one of its top ten largest customers. "Our C24 EPS estimate for NXPI is more than 30% below consensus," they wrote.

The investment bank reiterated a Sell rating on NXPI.

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