On Tuesday, CFRA kept its Buy rating on Infineon (OTC:IFNNY) Technologies AG (IFX:GR) (OTC: IFNNY), with a revised price target of EUR41.00, a slight increase from the previous target. The firm's decision reflects its outlook on the company's potential to overcome current challenges in the auto and industrial sectors.
The price target adjustment from EUR38.00 to EUR41.00 aligns with a 16 times multiple of the firm's fiscal year 2025 earnings per share (EPS) estimate, which is comparable to industry peers and slightly below Infineon's five-year average of approximately 17 times. CFRA has also adjusted its EPS forecasts, reducing the fiscal year 2024 estimate by EUR0.28 to EUR1.96 and the 2025 estimate by EUR0.30 to EUR2.55.
Infineon reported March quarter sales of EUR3.63 billion, marking a 12% year-over-year decline, and an EPS of EUR0.42, down 39%, which was still marginally above the consensus. Concurrently, the company reduced its fiscal year 2024 sales guidance by about 5%. Despite these setbacks, CFRA views the headwinds in the Automotive sector, which accounted for 57% of Q1 sales, as temporary. The firm anticipates sustainable growth in electric vehicles (EVs) in the coming years, supported by delayed EV forecasts from Western original equipment manufacturers (OEMs).
The analyst pointed out that there are multiple indicators suggesting that Infineon's results may be stabilizing. Inventory days have decreased to 178, and the backlog remained flat at EUR24 billion, following several quarters of less favorable results for both metrics. Additionally, the analyst highlighted the growing momentum in vertical power applications for artificial intelligence, including significant design wins for Infineon, which could structurally benefit the company's Power & Sensor Systems (PSS) division, representing 20% of March quarter sales.
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