Infineon Lifts Guidance Amid ‘Booming’ Chip Market. Why the Stock Is Falling.

Infineon Lifts Guidance Amid ‘Booming’ Chip Market. Why the Stock Is Falling.

Infineon Lifts Guidance Amid ‘Booming’ Chip Market. Why the Stock Is Falling.

The global chip shortage has affected auto makers in particular.


Dreamstime


Infineon Technologies

stock fell more than 3.5% early on Tuesday, despite the German chip maker lifting its full-year guidance amid the “booming” semiconductor market.

The Frankfurt-listed company’s revenue and profit rose in the second quarter, as demand for semiconductors remained high in a global shortage.

Revenue rose 36% year-over-year to €2.7 billion ($3.25 billion)—slightly beating the consensus—in the three months to Mar. 31, which

Infineon Technologies

said was driven by “brisk demand,” particularly in the automotive segment. Net profit rose 14% to €203 million.

“The semiconductor market is booming; electronics that help accelerate the energy transition and make work and home life easier remain in high demand. The push for digitalization continues unabated,” said Infineon Chief Executive
Dr. Reinhard Ploss.
He added that demand “greatly exceeds supply.”

The company warned that revenue growth in the third quarter would continue to be held down by supply constraints, including the temporary shutdown of its manufacturing facilities in Austin, Texas in February and capacity limitations at foundries.

Ploss said the company was seeing bottlenecks in segments where it depended on chips supplied by foundries.

Read:Intel Says Global Chip Shortages to Last Two More Years as Car Makers Endure

The second-quarter revenue beat was driven by its automotive segment, which is far from a surprise, given that auto makers have been particularly affected by the global chip shortage, with many companies pausing production.

Germany’s

Daimler

warned at the end of last month that the shortages could hit sales in the second quarter, while

Renault,


Volvo

and

BMW

issued similar warnings just days earlier. Both

Ford

and

GM

have already called the crisis a billion dollar headwind to 2021 earnings.

The world’s largest chip makers have experienced soaring demand so far this year as a result, also rushing to invest in capabilities to meet the demand going forward.


Tesla

chip supplier

STMicroelectronics

said on Thursday it would invest $2 billion this year to increase manufacturing capacity.

Also:News From the Front on Semiconductors: The Shortage Is Getting Worse.

But Infineon said it still planned investments of around €1.6 billion, the same amount it announced in the first quarter.

The company raised its full-year guidance following its second-quarter results, now expecting revenue of around €11 billion and a profit margin of 18%. After the first quarter, Infineon had forecast full-year revenue of €10.8 billion and a profit margin of 17.5%.

Looking ahead. UBS analysts expected the stock to underperform or trade in line with the market on Tuesday, citing the recent share price performance. Infineon stock has climbed 113% in the past 12 months, as of Monday’s close, but was 3.6% down at €32.48 in early trading on Tuesday. They also noted that, unlike its peers, Infineon wasn’t ramping up its capital expenditure. They maintained a buy rating on the stock with a target price of €42.