ST Stocks: A 2025 Marked by Underperformance by Nearly 20 Points Compared to the CAC 40
The Franco-Italian semiconductor manufacturer shows a decline of 7.67% for the year, while the Parisian index has gained 11.1%. Amid repeated disappointments with margins, a sharp summer drop, and tentative signs of recovery in the second half, STMicroelectronics is experiencing a transitional phase marked by a significant industrial restructuring. Nevertheless, analysts' consensus predicts a potential rebound of 35% compared to the year-end price.
Two Significant Drops Accounted for the Majority of the Downward Pressure
The performance gap with the CAC 40 is mainly due to two phases of significant correction. The first occurred at the end of July when the stock lost 21% in just four days after the group revealed quarterly forecasts deemed disappointing. The Franco-Italian company announced it expects another year-over-year decline in its third-quarter results, with net revenue of $3.17 billion and a gross margin of about 33.5%, compared to 37.8% a year earlier. Following the disappointing forecasts from NXP and Texas Instruments, STMicroelectronics lagged behind the main Paris index due to lower-than-expected margin forecasts. The second correction in October resulted in a 15.44% drop over three days following the quarterly release. A 15.63% increase in May, driven by sector optimism surrounding TSMC, was not enough to reverse the annual trend. The semiconductor specialist's stock was particularly sought after on the stock market, benefiting from the favorable publication by its competitor, Taiwan Semiconductor Manufacturing Company.
Results Decline Despite Sequential Improvement in the Third Quarter
In the third quarter of 2025, STMicroelectronics reported revenues of $3.19 billion, down 2.0% year-over-year but up 15.2% compared to the previous quarter. For the first nine months of the year, cumulative revenue reached $8.47 billion. The gross margin was 33.2% and the operating margin was 5.6%, impacted by restructuring charges and underutilized capacity. Net income was $237 million. The book-to-bill ratio was above one in the second half of the year, with the Automotive sector above parity and the Industrial sector at parity.
The guidance for the fourth quarter projects revenue of $3.28 billion, representing a sequential growth of 2.9%, and a gross margin of approximately 35.0%. The midpoint of this guidance translates to full-year 2025 revenue of about $11.75 billion, indicating a growth of 22.4% in the second half compared to the first half of the year, confirming signs of market recovery. Investments have been adjusted downward, with net Capex now slightly below $2 billion for 2025.
A Bet on Restructuring Amid Persistent Risks
Structural opportunities remain intact. The acquisition of NXP's MEMS business is expected to strengthen the product portfolio, while the industrial restructuring program aims to generate annual cost savings of several hundred million dollars by the end of 2027. Free cash flow generation is gradually improving, with $130 million generated in the third quarter.
However, risks remain numerous: volatility in trade and tariff policies, macroeconomic uncertainties, persistently sluggish automotive demand, currency fluctuations, and increased Chinese competition. For 2026, analyst consensus suggests an average target of 30 euros, indicating a potential 35% increase from the closing price of 22.16 euros. This scenario is based on the assumption of a gradual normalization of end markets and the group's ability to execute its transformation plan. If signs of recovery become evident in the second half, the stock could regain strength. However, its trajectory will be contingent on visibility into demand and the evolution of the geopolitical context.
This content has been automatically translated using artificial intelligence. While we strive for accuracy, some nuances may differ from the original French version.
