Barclays downgrades STM to ‘underweight’ over China risks, Valuation By Investing.com
Investing.com — Barclays (LON:) downgraded STMicroelectronics NV (EPA:) to an “underweight” rating from its previous review of “equal weight,” citing elevated risk and valuation concerns.
Analysts cited STM’s exposure to the Chinese market (about 15% of revenue) as a major concern.
Given growing trade restrictions and China’s push for semiconductor independence, Barclays warns that STM could face significant headwinds if access to the Chinese market is reduced.
The report also raises doubts about STM’s ability to meet its medium-term growth targets without strong contributions from its China operations.
In addition, the report points to the establishment of high-end STM stations in the industrial sector, exposure to the silicon carbide market, and the estimated tracking of power applications for AI servers.
These factors, coupled with low demand for automotive and industrial components, are expected to slow STM’s adoption rate compared to its peers.
Analysts believe that these issues create a negative outlook for the company, especially in the near term.
Barclays has revised STM’s price target down from €25 to €20, using a reduced 2026 price target to a multiple of 12x.
The company says STM’s current valuation does not adequately reflect these growing risks, especially as it continues to trade at a discount to its peers.
The downgrade comes ahead of STM’s fiscal year-end results, scheduled for January 30, which are expected to reveal weaker-than-expected guidance for the first quarter of 2025.
Barclays also identifies potential risks, such as a faster-than-expected global semiconductor recovery, the successful implementation of a China-focused STM strategy, or renewed confidence in its long-term growth targets. However, these scenarios seem highly unlikely in the current market conditions.
