Investors reject STMicro CEO’s growth assurances, stocks plunge

  • Q3 sales, gross margin above expectations
  • Expects sales to grow 1.8% in Q4 vs. Q3
  • CEO confident of being on ‘growth trajectory’ in 2023
  • Shares fall almost 8%

PARIS, Oct 27 (Reuters) – Investors brushed aside the optimistic remarks of the boss of STMicroelectronics on Thursday after the Franco-Italian chipmaker reported a slower pace of growth at the end of the year, amid the decline demand for electronics adds to fears of a global recession.

Shares of the Geneva-based company, whose biggest clients include iPhone maker Apple (AAPL.O) and car manufacturer Tesla (TSLA.O)plunged nearly 8% at 09:07 GMT, making the stock the worst performer in France’s blue chip CAC 40 index (.FCHI).

“The results are good but the outlook is disappointing,” said a Milan-based trader, noting general caution about the outlook for the sector.

Headwinds are building for the semiconductor industry, with rising tensions between Taiwan and China and the United States and China and runaway inflation that could reduce spending on cars, smartphones and other consumer products .

On a call with analysts, STMicro’s boss twice said the company had great visibility on the group’s orders for the next six to eight quarters, with its manufacturing plants operating at full capacity.

“This makes us very confident to lead the company on a growth trajectory in 2023,” said Jean-Marc Chery, confirming the group’s target of $20 billion in annual revenue by 2027 at most. late.

Biggest rival Texas Instruments Inc (TXN.O) said this week that it expects demand to decline in most of its end markets, while South Korean company SK Hynix Inc. (000660.KS) warned of an “unprecedented deterioration” in demand for memory chips.

STMicro said earlier that it expects fourth-quarter sales to grow 1.8% from the prior quarter to around $4.4 billion. This contrasts with a 12.6% jump in the three months ending September 30.

Co-controlled by the Italian and French governments, STMicro said demand increased for all of its products in the third quarter, beating market expectations, with total net sales reaching 4.32 billion.

Gross margin came in at 47.6% in the third quarter, also above analysts’ average forecast.

STMicro said it now expects annual net revenue of $16.1 billion, up 26% year-on-year, along with a gross margin of around 47.3% , in line with previous forecasts.

Reporting by Mathieu Rosemain; Editing by Simon Cameron-Moore, Clarence Fernandez and Tomasz Janowski

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