NXP Semiconductors: Fair Value Maintained Despite Tariff ‘Carnage’

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

Key Morningstar Metrics for NXP

• Fair Value Estimate: USD 300
• Morningstar Rating: ★★★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

NXP Stock Update

We maintain our $300 per share fair value estimate and wide moat rating for NXP Semiconductors, along with maintaining our ratings across the rest of our US and European analog/mixed-signal chipmaker coverage, amid a host of tariffs levied by the US government, with our greatest concern stemming around the 25% tariffs on the automotive sector.

Across our coverage, if the stated tariffs are retained, we can envision scenarios where our fair value estimates may fall 10%-20%. This downside would come if higher automotive production costs lead to higher prices for buyers, lower volumes sold, and, thus, fewer chips deployed in these vehicles.

We remain optimistic about the secular trend of rising chip content per car, especially within electric vehicles, but revenue growth from content gains per car might be partially (or fully) offset by volume declines. Similarly, these chipmakers were just starting to come out of a severe inventory correction across the industrial end market and a lesser one in automotive. We are modeling a snapback in demand as these excess inventories are used up, but lower production would stunt the magnitude of the cyclical recovery.

Across the carnage of the April 3 selloff, NXP is the cheapest name across our coverage, trading near $172 and a 40%-plus discount to our fair value. In a downside scenario where tariffs remain in place, we can envision a roughly $2 billion decline in revenue in the later years of our five-year forecast period (say, down to $16 billion in fiscal 2029) since NXP has over 50% exposure to autos.

Still, this scenario would bring our fair value to the $260 range. To justify a $172 stock price, we would need to model a severe headwind to automotive demand, coupled with virtually no growth elsewhere. This contrasts with NXP’s medium-term target of 8% growth, which we view as slightly ahead of an otherwise-normal industry growth rate.