STMicroelectronics’ STM shares have tumbled 33.9% in the past six months, significantly underperforming the Zacks Computer & Technology sector and the Zacks Semiconductor-General industry’s declines of 17.2% and 28.5%, respectively.
The STM stock has underperformed its industry peers, including NVIDIA NVDA, Texas Instruments TXN and Amtech Systems ASYS.
Over the same period, NVIDIA, Texas Instruments and Amtech Systems recorded losses of 29%, 25.1% and 22%, respectively.
The bearish sentiment surrounding the stock can be attributed to a challenging outlook for the first quarter of 2025, marked by a steep 22.4% year-over-year revenue decline in the fourth quarter of 2024 and pronounced weakness across end markets, especially within the automotive and industrial segments.
While STM's recent performance may seem discouraging, its ongoing initiatives, advanced microcontroller portfolio and increasing investment in Silicon Carbide (SiC) technologies provide a solid foundation for long-term growth.
SiC Momentum Remains Core Growth Driver for STM
STMicroelectronics has been strategically enhancing its focus on SiC technology.
A notable achievement in 2024 was STM’s generation of $1.1 billion in revenues from SiC products, including high-performance MOSFETs and diodes. This success was underpinned by multiple high-value wins with automotive and industrial customers, including a strategic cooperation with Ampere. The introduction of STM's fourth-generation SiC MOSFET technology further solidified its position in the market, offering enhanced power efficiency, density and robustness.
The China market emerged as a key growth engine for STM's SiC products, driven by healthy design-in activities and deepening partnerships with leading automakers. In 2024, STM reported securing more engagements with top China carmakers than any other supplier, highlighting its strong market position. A landmark long-term SiC supply agreement with Geely Auto exemplified STM's strong foothold in this rapidly expanding market.
To bolster its manufacturing capabilities, STMicroelectronics announced the construction of a high-volume SiC manufacturing facility in Catania, Italy. This initiative aims to create a vertically integrated manufacturing hub, enhancing the company's ability to meet the growing demand for SiC products. These efforts are expected to improve operating efficiency and yield annual cost savings in the high-triple-digit million-dollar range by the end of 2027.
Design Wins Boost STMicroelectronics’ Prospects
STM capitalized on the industry's shift toward software-defined vehicle architectures and electrification systems. The company secured multiple high-value design wins, particularly in consolidating electronic control units (ECUs) into more powerful units and adopting zonal architectures. STM collaborated with Mobileye on the EyeQ6 family, enhancing advanced driver-assistance systems for Level 1 and 2 functionalities.
In the industrial sector, STM reported a broad range of design wins in 2024, including applications in data centers, electric vehicle charging stations, renewable energy systems, white goods and factory automation. The company introduced products and reference designs tailored for high-performance telecom applications and AI server power supplies, highlighting its commitment to innovation in power and energy management.
STM32 Portfolio Strengthens STM’s Growth
STMicroelectronics’ advancements in the STM32 microcontroller series throughout 2024 underscore the company's dedication to delivering cutting-edge solutions that cater to the evolving needs of its diverse customer base.
In the fourth quarter, STM announced a service within the STM32 ecosystem, aiming to enhance development efficiency and time-to-market for customers. This initiative reflects the company's commitment to providing comprehensive solutions that support developers in leveraging the full potential of STM32 microcontrollers.
In December 2024, STMicroelectronics introduced the STM32N6 series, the company's most powerful microcontrollers to date. These microcontrollers are equipped with a proprietary neural processing unit, enabling advanced machine learning capabilities at the edge. This advancement positions STM to meet the growing demand for AI-enabled applications across various industries.
Furthermore, STM's ongoing collaborations and product developments within the STM32 line have solidified its leadership in the 32-bit microcontroller market.
Conclusion: Buy STM Stock
STMicroelectronics' strong product innovation, expanding STM32 microcontroller portfolio, strategic focus on SiC, and solid design wins across automotive and industrial markets position it for long-term growth. With strong fundamentals and rising momentum in high-growth markets, STM presents a compelling buying opportunity for investors seeking exposure to the semiconductor space.
STMicroelectronics currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
