STMicro Set To Top 2020 Revenue Guidance Driven By 3Q; Shares Surge 7%

STMicroelectronics said it expects to top its annual sales forecast following a sharp rise in demand for automotive products and microcontrollers in the third quarter, sending shares up 6.9% in Thursday’s pre-market session.

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STMicro (STM) now forecasts preliminary net revenues in the third quarter ended Sept. 26 of $2.67 billion, up 27.8% sequentially and 690 basis points above the high end of the range. The prior outlook published in July was for Q320 net revenues to be $2.45 billion, an increase of 17.4% sequentially, plus or minus 350 basis points.

“We ended Q320 with net revenues above the outlook range due to significantly better than expected market conditions throughout the quarter,” said STMicroelectronics CEO Marc Chery. “Sharp acceleration in demand of Automotive products and Microcontrollers, as well as our engaged customer programs in Personal Electronics, were the main factors that contributed to this result.”

Chery disclosed that the semiconductor company now plans for FY20 revenues to be above $9.65 billion versus the range of $9.25 billion – $9.65 billion it expected previously.

“I look forward to providing additional details on the third quarter, and on our fourth quarter guidance, during our earnings call on October 22,” Chery added.

Shares in STM have already gained 14% so far this year, with the average $35.46 average analyst price target implying that another 15% upside potential lies ahead.

Canaccord Securities analyst Jonathan Dorsheimer last month reiterated a Buy rating on the stock with a $36 price target (17% upside potential), following a “positive” analyst day. Dorsheimer’s current model assumption is for revenue of $2.47 billion in 3Q.

“The company noted it is continuously growing market share in auto applications as well as overall positive dynamic for transformation of automotive sector towards electrification and digitization,” Dorsheimer wrote in a note to investors. “Our read through of these commentaries is a more upbeat dynamic for other segments driven largely by growth in electric vehicles (EVs) particularly in Europe and China.”

The rest of the Street shares Dorsheimer’s bullish outlook on the stock. The Strong Buy analyst consensus boasts 7 Buy ratings versus 1 Hold rating. (See STM stock analysis on TipRanks)