STMicro Earnings: We're Keeping Our Eyes on the Road Ahead in Automotive; Shares Undervalued

Narrow-moat STMicroelectronics reported solid third-quarter results. The firm’s fourth-quarter outlook was a bit weak because of headwinds in its industrial business, in line with comments from rival Texas Instruments earlier this week, but we’re encouraged by STMicroelectronics’ optimism and visibility into automotive chip growth in 2024. Longer term, we’re confident in STMicroelectronics' strong position in the secular trend toward higher chip content per car, especially in electric vehicles. We maintain our fair value estimate of $66 per U.S. share, while raising our fair value on French shares to EUR 63 from EUR 60, based on currency effects. We continue to view STMicroelectronics' shares as materially undervalued, especially for long-term, patient investors willing to ride out the cyclical downturn in the industrial end market.