STMicroelectronics slashes guidance over slump in automotive industry

By Louis Goss

Swiss chipmaker STMicroelectronics on Thursday slashed its guidance for 2024, as the company warned a slump in the car market is set to hit its full-year sales.

The Geneva headquartered company said a slowdown in demand from the automotive and industrials sectors had already seen its sales in the first quarter drop by 18.4%, to $3.47 billion.

The sales figures saw STMicroelectronics perform roughly in line with expectations, with a selection of 16 analysts polled by Factset having forecast the company would generate revenue worth $3.35 billion.

STMicroelectronics, which counts Tesla, Apple and Huawei as major customers, said it now expects to generate just $14 billion to $15 billion in revenue for the full-year 2024, compared to the $15.9- $16.9 billion it previously expected. Analysts polled by FactSet expected $15.2 billion revenue for the full year.

Shares in STMicroelectronics (IT:STMMI) (STM) rose on Thursday having dropped 13% this year.

The slump in revenue saw STMicroelectronics' profits fall 50.9% to $513 million, as it said it now expects its gross margins will sit in the "low 40s" throughout 2024, having seen its margins drop from rates of 49.7% in the first quarter of 2023 to 41.7% in the first quarter of 2024.

The Swiss firm, which in 2023 made 45% of revenue from its automotive & discrete group which sells chips to carmakers, said the slump will also lower its second quarter sales by 26% year-on-year, to $3.2 billion.

The company, which was formed through the merger of France and Italy's state-owned microchip makers in 1987, said it also expects to generate margins in the second quarter of just 40% as a result of lower sales prices and spare capacity.

STMicroelectronics noted the slowdown in sales to carmakers and the ongoing slump in sales to industrial companies was partially offset by higher sales to manufacturers of personal electronics.

Analysts at Bernstein said STMicroelectronics guidance cut could be viewed by investors as a "de-risking of the stock," as they argued the chipmaker is still a good bet long-term "with strong secular demand still in place... beyond the cyclical headwinds."

-Louis Goss

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04-25-24 0453ET

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