The near-term weakness in demand and uncertain macro environment have weighed on the sales and stock prices of chip makers and designers. Thankfully, the automotive sector, especially EVs (Electric Vehicles) that require a lot of chips, has emerged as a bright spot for companies like Texas Instruments (NASDAQ:TXN), Marvell (NASDAQ:MRVL), and NXP Semiconductors (NASDAQ:NXPI).
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The ongoing electrification and introduction of next-generation ADAS (Advanced Driver Assistance Systems) and autonomous driving systems in the auto industry provide a solid foundation for long-term growth. While the long-term fundamentals remain strong, supply constraints could play spoilsport in the short term. Let’s look at what the analysts predict for these chip companies for the next 12 months.
Will TXN Stock Go Up?
Texas Instruments’ revenue remains weak, reflecting lower demand in the end market. However, the automotive market continues to support its financials. The Automotive segment, which accounts for about 25% of its total sales (based on 2022 revenue), grew strongly.
The company sees increased use of chips in vehicles as cars become safer, smarter, and more connected. The company sees higher growth in the auto market compared to other segments.
TXN stock sports a Moderate Buy consensus rating on TipRanks based on seven Buys and 12 Holds, as weakness in other end markets, could offset the benefits from the Auto segment. Thus, analysts’ average price target of $184.94 implies a limited upside of 5.27% over the next 12 months.
Is MRVL a Buy, Sell, or Hold?
Marvell’s auto revenue crossed $200 million in Fiscal 2023, an important milestone for the company. Looking ahead, MRVL is confident that the auto-end market will continue to grow and expects to deliver $500 million in annual revenues in the coming years.
As for Fiscal 2024, MRVL expects auto revenue to improve, with Q1 marking a year-over-year and sequential improvement. However, the short-term headwinds from inventory issues and weakness in the Industrial segment will likely remain a drag on overall sales.
Nonetheless, MRVL stock is a Strong Buy on TipRanks, reflecting 19 Buy and two Hold recommendations. Further, analysts’ average price target of $55.60 implies 26.25% upside potential.
What’s the Prediction for NXPI Stock?
NXP Semiconductors witnessed robust demand from the Automotive market that outstripped supply and production levels in 2022. Its Automotive revenues increased 25% year-over-year to $6.8 billion in 2022, supporting the total sales.
NXPI sees an increase in global vehicle production levels and the secular adoption of EVs as tailwinds. While auto revenues are likely to rise, supply constraints could limit growth.
NXPI stock has received nine Buy and 11 Hold recommendations for a Moderate Buy consensus rating. Analysts’ average price target of $195.85 implies a limited upside potential of 7.05%.
Bottom Line
The strength in the automotive end market could continue to drive the revenues of these chip companies. However, weakness in other end markets and supply constraints remain a drag. Meanwhile, among TXN, MRVL, and NXPI stocks, MRVL looks more compelling near the current levels as it sports a Strong Buy consensus rating and offers higher upside potential.
