Why This Analog Semiconductor Stock Is A Top Undervalued Pick

Following its second-quarter results reported on Monday, NXP Semiconductors NXPI has seen its outlook reassessed by Wall Street analysts.

The company announced second-quarter revenue of $2.93 billion, a 6% decrease year-over-year, yet still surpassing analyst estimates of $2.90 billion.

Looking ahead, NXP anticipates third-quarter revenue to range from $3.05 billion to $3.25 billion, versus estimates of $3.05 billion.

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Cantor Fitzgerald analyst Matthew Prisco reiterated an Overweight rating on NXP Semiconductors, maintaining a $250 price forecast. Meanwhile, Stifel analyst Tore Svanberg maintained a Hold rating on the company, while increasing his price forecast from $170 to $210.

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Cantor Fitzgerald’s Analysis

Prisco noted that NXP Semiconductors delivered a modest beat-and-raise quarter, driven by strong performance in the Industrial IoT segment. While the analyst would have preferred the upside from automotive, management guided for continued strength based on a cyclical recovery in core end markets and company-specific growth catalysts.

He noted that gross margins came in slightly above expectations due to more substantial revenue, while operating expenses ran higher than expected, primarily due to merger and acquisition activity. However, operating expenses aligned with NXP Semiconductors’ long-term intensity targets when adjusted for the elevated revenue levels.

Prisco noted that the company also showed encouraging inventory management. Days Inventory Outstanding (DIO) dropped by 11 days quarter-over-quarter to 158, and channel inventory remained stable at nine weeks, below the target of eleven weeks, indicating results were likely driven by genuine end-market demand rather than inventory builds.

That said, there were a few points of contention, as per the analyst. The gross margin guidance came in a bit softer than previously implied; at $3.15 billion in revenue, gross margin should have been closer to 57.5% based on prior comments, he said. In addition, operating margin guidance was pressured by M&A-related costs, slightly muting the leverage typically expected during an upcycle.

Heading into the earnings call, Prisco remained focused on the quality and sustainability of this beat and raise. While the near-term performance may be weighed down by NXP Semiconductors’ exposure to the auto sector, the analyst remained optimistic about the long-term opportunity. He noted NXP Semiconductors as one of the most undervalued names in the analog semiconductor space, citing strong secular growth drivers and a resilient through-cycle business model.

Stifel’s Take

Svanberg viewed NXP Semiconductors’ June quarter as primarily in line with expectations, with revenue of $2.93 billion growing 3.2% quarter-over-quarter and beating estimates by 0.9%. Adjusted EPS reached $2.72, exceeding the analyst’s and Street estimates by $0.06 and $0.04, respectively. He noted that all end markets performed within anticipated ranges, showing a stable demand backdrop.

Free cash flow (FCF) came in strong at $696 million, 24% of revenue, rising 63% quarter-over-quarter, Svanberg noted. He said that on a trailing twelve-month (TTM) basis, FCF rose to $1.98 billion, improving by $120 million from the prior quarter. TTM FCF leverage ticked up slightly to 4.20x. However, TTM EBITDA dipped to $4.75 billion from $4.89 billion. Net leverage increased to 1.75x due to rising net debt, which hit $8.31 billion following shareholder returns and the TTTech Auto acquisition, Svanberg noted.

Looking ahead, management guided for a stronger third quarter, he noted. NXP Semiconductors expects revenue to hit a midpoint of $3.15 billion, a 7.7% sequential increase and above both the Street and the analyst’s estimates. EPS guidance also came in stronger, with a midpoint of $3.10-$0.37 above the analyst’s estimate and $0.04 above the Street’s. Gross margin and operating margin guidance also came in ahead, signaling improving profitability, Svanberg noted.

Despite these positives, the analyst flagged some caution. He noted that NXP Semiconductors’ results and outlook still trail historical seasonal trends, reinforcing its role as a “late corrector” in the semiconductor space, particularly compared to smaller peers that already reset more steeply.

The team acknowledged lingering macro uncertainty heading into the second half of 2025 and stressed that, while NXP Semiconductors hasn’t yet seen significant order volatility or tariff impacts, the long-term visibility remains cloudy, Svanberg said. As a result, the analyst awaited more evident signs of a sustained recovery in demand, margin expansion, or macro clarity.

Price Action: NXPI stock is down by 0.66% to $226.79 at the last check on Tuesday.

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