Thanks to today's leap (+6,6%) STM has almost eliminated the declines of the last 12 months also thanks to the push of the American index Sox (Philadelphia Semiconductor Index), which closed up by 2%. Now only 3% separates Stm from the prices of a year ago, after the sharp drop in August and September, when in a long interview with The Wall Street Journal on 19 September Carlo Bozzotti admitted that he could not fix a date for the break even of the jv with Ericsson and confirmed that demand for chips was showing signs of slowing down.
Despite these negative indications, the stock has recovered significantly since the beginning of October, to the point that only 3% separates the stock from the prices of 12 months ago, after a difficult year in which STM had to face the crisis of some large customers, from Nokia to the Sony-Ericsson jv itself. The stock thus confirms its volatility: until March, on the wave of the prospects of recovery in demand, the sector achieved a flattering rise, then the fall was only partially compensated. Despite yesterday's rally, the stock is still a good 30% down from its spring highs. But in the last month there has been an unexpected recovery of 28%. And now? Do share prices already discount a business deceleration or not?
Operators await with growing interest the data for the quarter that the company will present in Paris on 24 October: Citigroup experts expect that the share will continue to underperform the sector in the light of the "substantial problems" of the Stm- Ericsson. Ing analysts Ing analysts only lowered the target price from 6,30 to 5,50 euros, confirming the hold rating on the stock. Conversely, Rbs, which confirmed its buy and a target of 6,30 euros, continues to bet on the joint venture led by Bozzotti. It is obvious, the reasoning goes, that the quarterly results will settle in the lower part of expectations given also the recent warnings from competitors, but observe the demand for smartphones/tablets still appears robust and with the share trading at 0,38 times the 2012 Ev/Sales, below the 0,5 times of March 2009, can do nothing but recover ground on the Stock Exchange.
Supporting this thesis is the rapid rebound from the beginning of October in the Philadelphia Semiconductor index, the basket of companies in the chip sector. In addition to the consideration that some business areas in which Stm is particularly active seem to be in excellent health, as evidenced by the push from Apple or the accounts from Google: this is the case with tablets but even more so with the iPad to which the company supplies the gyroscopes and other types of mems. This may explain why Stm runs both in Milan and in Paris much more than the Stoxx index of European high tech companies, Asml (+2%) and the German Infineon (+0,3%). However, much will depend on the fate of the dollar: a recovery of the US currency against the euro could give a significant boost to the company's accounts, which does not rule out shopping, on the strength of the billions of liquidity available, in the Americas and Asia.
However, the paradoxical story of Fairchild Semiconductor, which yesterday was the first to give its results for the quarter, demonstrates that making forecasts at this moment is more risky than ever: the stock closed with a jump of 10,2%, after recorded in the first minutes after the announcement of the results, a sharp drop of 7% linked to the decline in sales. Then, the rebound: Fairchild, analyst Bobby Burleson explains to Bloomberg, is now equipped to lower the break-even point, with interesting prospects for 2012.
