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Why STMicroelectronics Shares Fell 13% on Wednesday


What happened

Shares of semiconductors maker STMicroelectronics (NYSE: STM) fell as much as 13% on Wednesday morning, following the release of solid third-quarter results with a side of cautious management comments on the state of global chip markets.

So what

STMicro saw earnings rise 58% year over year to land at $0.41 per share. Revenue grew 18% richer, stopping at $2.52 billion. Your average analyst would have settled for earnings near $0.37 per share on top-line sales in the neighborhood of $2.50 billion.

Looking ahead, management painted a fourth-quarter revenue target of approximately $2.6 billion, or 6% annual growth. Investors were quick to shrug off the strong third-quarter figures to focus on this upcoming period of slower sales growth.

A technician uses tweezers to install a microchip on a small circuit board.

Image source: Getty Images.

Now what

Sales of analog chips and sensors rose 33% above the year-ago period's, followed by 16% higher revenues from automotive products. Microcontroller sales barely moved, held back by "soft market conditions" in China. The Chinese softness also lurks behind STMicro's modest fourth-quarter revenue guidance.

The stock has now plunged 27% lower in 2018 to trade at 10.6 times forward earnings. Today's big drop looks like a mistake in light of STMicro's great automotive and sensor results.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Personal Finance , Stocks
Referenced Symbols: STM



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