STMicro Remains Bullish on Near-Term Chip Demand; Shares Undervalued vs. $56/EUR 55 FVE

Narrow-moat STMicroelectronics reported strong second-quarter results and provided investors with an outstanding forecast for the rest of 2022, hinting at good times into 2023 as well. The company is firing on all cylinders, with expanding capacity in order to satisfy hearty automotive and industrial chip demand, favorable pricing on its products, and even a weaker euro (relative to the U.S. dollar) contributing to operating margin expansion. We've raised our fair value estimate to $56/EUR 55 per share from $53/EUR 51. Even though these good times may not last forever, we still view the shares as significantly undervalued.