British semiconductor parts supplier Morgan Advanced Materials (GB:MGAM) plunged 20% after the company flagged falling demand amid an uncertain outlook related to President Donald Trump’s threat to impose tariffs on U.S. chip imports.
The firm, which makes parts for silicon carbide (SiC) power semiconductors, a key component in electric vehicles (EVs) such as Tesla (TSLA), warned organic revenue would fall this year as it battles an increasingly difficult macroeconomic outlook. “Weakness in the SiC power electronics market expected to continue through 2025,” the firm said. Other stocks in the SiC space include Wolfspeed (WOLF) and Coherent Group (COHR).
Sales have been under pressure amid weakening demand for EVs in the key U.S. market. Additionally, in 2023 Tesla said it would slash by 75% the use of silicon carbide transistors in its next-generation vehicle powertrains.
Meanwhile Trump’s threats of tariffs on semiconductor imports – which could start at 25% and rise thereafter – are another worry. The company has facilities in key tariff targets Mexico, Canada and China, as well as in the U.S. According to Reuters, the company said it was prepared to move locations to mitigate the impact of tariffs.
Morgan Advanced said it had not factored in tariffs to its guidance for the year ahead, however. “These are fast moving, with multiple jurisdictions being discussed, and without understanding the details of any proposals it is difficult to assess the overall impact,” the company said in its results presentation.
Weakness Seen Ahead
Morgan Advanced said revenue fell 1.3% to £1.1 billion ($1.39 billion) in 2024 and forecast organic revenue to decline in the mid-single-digit percentage range this year. Adjusted operating profit increased by 6.7% last year as margins picked up to 11.7% on a cost-cutting initiative, while it achieved a 3.7% organic revenue increase in constant currency terms.
“We remain focused on delivering against our strategic initiatives and expect a return to a 12.5% adjusted operating profit margin during 2025,” said CEO Pete Raby.
Looking ahead, the company also flagged weakness in China and Europe for the lower guidance. “European and Chinese industrial and metals markets are weak, and we expect those to be a headwind, partially offset by the U.S.,” the company’s results presentation said.
Is MGAM a Good Stock to Buy?
Analysts have a Moderate Buy consensus rating on Morgan Advanced Materials stock, based on two Wall Street analysts offering 12-month price targets for Morgan Advanced Materials in the last three months. The average MGAM price target of 305.00p implies over 50% upside after the sharp move lower in the stock today.
