STMicroelectronics Shares Plunge on Revised Midterm Goals

By Mauro Orru

Shares in European chip maker STMicroelectronics NV dropped Wednesday after the company lowered most of its midterm targets and pushed them back a year to 2023.

At 1100 GMT, STMicroelectronics shares traded 10% lower at EUR30.58.

The company said at its capital markets day that it expects revenue of $12 billion and free cash flow of more than $1 billion in the midterm.

STMicroelectronics had forecast the same revenue and free cash flow at its capital markets day in 2019 for the period until 2022, but Wednesday's update is for the period until 2023.

The company cited the weakening of the U.S. dollar against the euro and rising trade tensions among China, the U.S. and Europe as some of the differences between its 2019 and 2020 update. The decline of legacy technology is taking place faster than anticipated, it added.

STMicroelectronics lowered midterm forecasts for gross margin, operating margin, and earnings before interest, taxes, depreciation, and amortization margin.

It now expects a gross margin between 39% and 40% in the midterm, instead of between 40% and 41% as projected in 2019.

It also expects a midterm operating margin between 15% and 17%, down from previous estimates of between 17% and 19%. The midterm Ebitda margin should come in between 25% and 26% rather than between 26% and 27%.

The new midterm targets are based on an exchange rate of $1.16 to the euro, while 2019 forecasts were based on $1.12 to the euro.

For 2020, STMicroelectronics is targeting revenue of $9.97 billion, with a gross margin of 37%, an operating margin of more than 12%, and an Ebitda margin at around 21.5%. The company in October guided for 2020 revenue at the midpoint to be about $9.97 billion, with a double-digit operating margin performance.

On the sustainability front, the company said it would seek to become carbon neutral by 2027, sourcing 100% renewable energy.

"We have built a comprehensive program with very ambitious targets for a company with such a large, global manufacturing footprint, and we will be working with key partners and stakeholders in a collaborative approach," Chief Executive Jean-Marc Chery said.

Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94

(END) Dow Jones Newswires

December 09, 2020 06:26 ET (11:26 GMT)

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