Melexis Earnings: Shares Jump 17% on Better-Than-Expected Performance; Undervalued at EUR 100 FVE

Although narrow-moat Melexis just met its sales guidance in the first quarter, shares have jumped by 17% compared with the prior closing. We believe the market gave low credit to management’s first-quarter guidance given broad concerns about an autos volume correction hitting Melexis’ chip sales. Management even increased its guidance sequentially, guiding for EUR 242 million-EUR 247 million in the second quarter, compared with EUR 241.7 million in the first quarter. We maintain our EUR 100 fair value estimate for Melexis, with the shares still offering 25% upside. As we reiterated in the past, we believe Melexis shares are a good buy during cyclical lows, given auto chip sales correct more during market downturns, but then come back strongly when there is a recovery. Melexis’ clean balance sheet makes it an ideal candidate to withstand cyclical downturns.