FBR Adds NXP Semiconductors To Top Pick List, Sees Revenue 'Snapback'

• Shares of NXP Semiconductors NV NXPI have declined 23.66 percent over the last six months, hitting a low of $73 on October 29.
• Christopher Rolland of FBR & Co. has maintained a Positive rating on the company, while reducing the price target from $115 to $105.
• While adding the stock to FBR’s Top Picks list, Rolland noted that lead times had stabilized for the company in October.

Analyst Christopher Rolland also believes that “the Street has underestimated the revenue “snapback” that may take place in mid 2016 given the mechanics of sell-in accounting and dynamics around a slowdown in the rate of inventory depletion.”

Following contracting lead times for almost three weeks through September, lead times were flat month on month in October. Rolland views this correction as “healthy and constructive for a new up-cycle.”

Rolland estimates that the company has a two-quarter inventory drawdown, which could drive a bounce back for NXP Semiconductors that is ahead of the consensus in 2Q16 and 3Q16.

“While it is difficult to determine the size of the total inventory build and linearity of the excess inventory burn, we believe the Street has underestimated the beneficial revenue growth impacts of a slowing in the rate of inventory burn in either 2Q16 or 3Q16,” the FBR report stated.