STMicroelectronics N.V. (STM): what the price assumes

In the published model solve dated 2026-Q2, anchored at $52.70, STMicroelectronics N.V. (STM) is priced for today's economics sustained for ~36.9 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-11.

Generated: 2026-08-10 · Exported: 2026-08-12 · Source: https://boothcheck.com/report/STM

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Solve inputs: computed at a 13.5% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~4.5 years.

Reconcile: at the x-ray's 9.3% required return this reads ~22.1 years; the models below use their own rates.

How unusual the bet is: elevated

Valuation X-Ray

Every valuation family lands below the price. The price therefore sits beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that call it expensive: Asset, Earnings, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.8%); the inversion above states its own rate.

Per-Model Detail (n=10)

Solvency

Bullet Takeaways

• STMicroelectronics is coming out of a bruising 2025 with real momentum: first-quarter 2026 revenue rose 23 percent year over year, the second quarter is guided to roughly $3.45 billion at the midpoint, and the 20-F records that "For 2026, we entered the year with a backlog higher than what we had entering 2025".
• The recovery is real but the price has sprinted ahead of it: at $71.42 (July 10, 2026) the stock trades near 5.3x revenue on a business whose trailing GAAP earnings nearly vanished in the downturn, and every family of valuation method reads the price as above its central estimate.
• The July 23 second-quarter report is the next test, with gross margin guided near 34.8 percent and the cost program (up to 2,800 voluntary departures, savings targeted in the high hundreds of millions annually exiting 2027) expected to show progress.

Bull Case

Semiconductor makers are peculiar things to value: the worse the trailing year, the better the forward setup often is, because inventory cycles swing demand far harder than end markets actually move. STMicroelectronics right now is the textbook case. The 2025 downturn crushed reported earnings to almost nothing, yet the business still generated about $2.2 billion of free cash flow, kept $1.6 billion of net cash on the balance sheet, and covered its interest 52 times over. A company that can absorb a cyclical collapse of that magnitude without burning cash or diluting holders (the share count has been flat for four years) is structurally healthier than its trailing income statement suggests.

The turn is now visible in the numbers rather than the narrative. First-quarter 2026 revenue climbed 23 percent year over year and beat estimates, management guided the second quarter to roughly $3.45 billion at the midpoint (about 25 percent year-over-year growth) with gross margin near 34.8 percent, book-to-bill ran above one across all end markets and regions, and distribution inventory has normalized. The company's own filing marks the inflection in its bluntest available form: "For 2026, we entered the year with a backlog higher than what we had entering 2025". Layered on top is a genuinely new demand pillar: management targets data center revenue above $500 million for full-year 2026, a market STM barely addressed a cycle ago.

What converts a cyclical bounce into a durable earnings level is the cost and capacity work happening underneath. The 20-F describes the "company-wide program announced in October 2024 to reshape our manufacturing footprint and resize our global cost base": shifting wafer output to 300mm fabs at Agrate and Crolles and 200mm silicon carbide at Catania, with annual savings targeted in the high hundreds of millions of dollars exiting 2027. In China, rather than ceding the market, ST built a dedicated joint-venture foundry "for high-volume 200mm SiC device manufacturing in China" that "will make SiC devices exclusively for us, using our proprietary SiC manufacturing process technology". And the customer list the filing names (Apple, Bosch, Continental, Denso, Mobileye, Samsung, SpaceX, Tesla among them) is the kind of design-win base that does not churn quickly. The bull case is a leaner cost base meeting a rising cycle, with the balance sheet already proven under stress.

Bear Case

The advantage that made STM a default supplier to the world's car and factory-equipment makers, broad analog and power portfolios manufactured in its own European fabs, is being chipped at from the east. The company's own 20-F concedes it "could face increased competition as a result of China's programs to promote a domestic semiconductor industry and supply chains", and China is precisely where the auto and industrial volume growth lives. ST's answer, a China-for-China joint venture that licenses its proprietary silicon carbide process into a local foundry, keeps revenue in the country but also accelerates the local ecosystem's learning curve. In power semiconductors, where ST built its silicon carbide franchise on early Tesla wins, Chinese entrants compete primarily on price, and the moat was never patents so much as manufacturing yield and scale, both of which erode with time.

The structural economics make that erosion expensive to fight. The filing is unusually direct: "Our capital needs are high compared to those competitors who do not manufacture their own products and we may need additional funding in the coming years to finance our investments". The integrated-manufacturer model means every pricing cycle lands on ST's own fixed-cost base; 2025 showed the mechanism, with gross margin down "250 basis points, mainly due to lower manufacturing efficiencies" as fabs ran under-loaded. The industry pattern is well documented in peer filings too: NXP's 10-K notes that "Investments in new capacity can result in overcapacity, which can lead to a reduction in prices and margins". ST is expanding 300mm and silicon carbide capacity into a recovery whose durability is exactly what is in question.

And the price already assumes the recovery matures into something exceptional. At $71.42, the market is paying about 5.3x revenue for a business whose revenue shrank through 2025, which works out to an assumption that ST eventually earns roughly 13.6 percent operating margins while growing revenue at the fastest pace it can self-fund for something like eighteen years. Of comparable fast-growers, only about 15 percent have sustained that kind of pace even ten years. Every family of method reads the price as above its central estimate, and the average analyst target of $63.76 sits below the market price, a street-versus-price gap that says the recovery is more than fully credited. If the cycle disappoints, or if Chinese competition compresses the silicon carbide margin structure, the multiple has no cushion under it: the earnings-power read on five-year average operating income sits at roughly a third of today's price.

Valuation

Trailing earnings are nearly useless for reading this price, and the price itself says so. GAAP earnings per share over the trailing year is $0.18, an artifact of the 2025 downturn plus restructuring and impairment charges, so today's $71.42 (July 10, 2026) has to be read against sales. At about 5.3x revenue, the price implies the business eventually earns an operating margin of roughly 13.6 percent and grows revenue near its self-funding ceiling for about eighteen years. The near-term pace is within what the company has recently delivered; the stretch is the duration. Historically, only about 15 percent of comparable fast-growers sustained that pace for even ten years.

The methods we use to triangulate all land below the price, which is itself the signal: this is a bet beyond what any standard frame supports on trailing data. The gentlest reads are the sales-based ones, with the sector price-to-sales lens landing about 12 percent below the price, and a cash-flow method that reaches within about 20 percent, but only by holding today's elevated EV/EBITDA multiple, roughly 32x, flat for five years against a sector median of 16x. The earnings-based lenses are harsher: even normalizing operating income across five years, which washes out the trough, the earnings-power read sits at roughly a third of the price. Some of that gap is honest cycle math. The 20-F attributes the margin damage to "lower manufacturing efficiencies" as fabs ran under-loaded, a reversible condition, and records that "For 2026, we entered the year with a backlog higher than what we had entering 2025", so the earnings base should rise from here. The question the price forces is not whether earnings recover but whether they recover far enough, fast enough, and stay elevated long enough to close a gap this wide.

The balance sheet is not the problem. Net cash stands at $1.6 billion, interest coverage runs 52 times, the company generated about $2.2 billion of free cash flow through the trough, and the share count has held flat over four years. The downside is not solvency; it is multiple compression on a cyclical whose price already embeds a long, uninterrupted expansion. The single most decisive variable is the slope of the margin recovery that the July 23 report begins to reveal.

Catalysts

The second-quarter report arrives before the European open on July 23, 2026, carrying guidance of roughly $3.45 billion in revenue at the midpoint (about 25 percent year-over-year growth, 11.6 percent sequential) and gross margin near 34.8 percent. The quarter is less about the revenue line, which management has effectively pre-committed, than about margin delivery and the book-to-bill commentary: the first quarter showed bookings above one across all end markets and regions with distribution inventory normalized, and a second consecutive confirmation would establish the recovery as broad rather than AI-narrow.

Two structural programs supply the medium-term milestones. The manufacturing reshaping announced in October 2024, concentrating output at the 300mm Agrate and Crolles fabs and 200mm silicon carbide at Catania, targets annual cost savings in the high hundreds of millions of dollars exiting 2027, with up to 2,800 employees leaving voluntarily over three years; 2025 absorbed $376 million of impairment, restructuring, and phase-out charges, so the savings now need to show up in gross margin as volumes return. Separately, management's target of more than $500 million of full-year 2026 data center revenue gives the AI-infrastructure story a checkable number.

Street positioning is the tension to watch: the consensus rating is a buy, but the average price target of $63.76 across 15 analysts sits below the market price after the stock's run, with recent individual targets as high as $84. Upward estimate revisions following the July print, or the lack of them, will determine whether the price grows into its multiple or waits for the fundamentals to catch up.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• NXPI (NXP Semiconductors N.V.)
• FY2025 10-K: …during development, potentially rendering our products outdated or noncompetitive before their introduction. If we are unable to successfully develop new products, our revenue may decline substantially. Moreover, some of our competitors are well-established entities, are larger than us and have greater resources than…
• FY2025 10-K: …current or expected future demand is strong and margins are, or are expected to be, high. Investments in new capacity 16 can result in overcapacity, which can lead to a reduction in prices and margins. In response, companies typically limit further capacity additions, eventually causing the market to be relatively…
• ADI (ANALOG DEVICES INC)
• FY2025 10-K: …industry, and we expect this competition to increase in the future, including from companies located outside of the United States. Competition is generally based on innovation, design, quality and reliability of products, product performance, features and functionality, product pricing, availability and capacity,…
• FY2025 10-K: …can benefit from such government incentives and we cannot, it could strengthen our competitors' relative position and have a material adverse effect on our reputation and business. Existing or new competitors may develop products or technologies that more effectively address the demands of our customers and markets…
• AVGO (Broadcom Inc.)
• FY2025 10-K: …top customers. This enhances our customer reach and our visibility into new product opportunities and, in the case of our semiconductor customers, enables us to support our customers in each stage of their product development cycle, from the early stages of production design to volume manufacturing and future growth.…
• FY2025 10-K: …dependent on our product mix, as well as the timing and amount of our revenue from our semiconductor solutions, software licensing and other products or solutions. In addition, increased competition and the existence of product alternatives, more complex engineering requirements, lower demand, shifts in spending…
• AMD (ADVANCED MICRO DEVICES INC)
• FY2025 10-K: …condition and results of operations. Economic and Strategic Risks • The markets in which our products are sold are highly competitive and rapidly evolving. • The semiconductor industry is highly cyclical and has experienced severe downturns. • The demand for our products depends in part on the market conditions in…
• FY2025 10-K: …terms, marketing arrangements, product bundling strategies, lack of software inoperability and business acquisitions can limit customers' ability to choose alternative products, including ours. This may limit our market share and decrease our margins and profitability, which may have a material adverse effect on our…
• NVDA (NVIDIA CORP)
• FY2025 10-K: …operations to provide long-term manufacturing capacity aligned with growing customer demand. Our supply chain is mainly concentrated in the Asia-Pacific region. We utilize foundries, such as Taiwan Semiconductor Manufacturing Company Limited, or TSMC, and Samsung Electronics Co., Ltd., or Samsung, to produce our…
• FY2025 10-K: …Profit and Gross Margin Gross profit consists of total net revenue less cost of revenue. Cost of revenue consists primarily of the cost of semiconductors, including wafer fabrication, assembly, testing and packaging, board and device costs, manufacturing support costs, including labor and overhead associated with…
• ASX (ASE Technology Holding Co., Ltd.)
• FY2025 20-F: …may negatively impact our business. Increasing competition may lead to declines in product prices and profitability and could have a material adverse effect on our business, financial condition, results of operations, and future prospects. Our profitability depends on our ability to respond to rapid technological…
• FY2025 20-F: …the end-use applications of various products, such as communications, computing, and consumer electronics products. Any deterioration of conditions in the markets for the end-use applications would reduce demand for our services and would likely have a material adverse effect on our financial condition and results of…
• AMAT (APPLIED MATERIALS INC /DE)
• FY2025 10-K: …the timing and circumstances of purchasing decisions. Substantial competition exists across all the segments of our business. Competitors range from small companies that compete in a single region, which may benefit from policies and regulations that favor domestic companies, to global, diversified companies, which…
• FY2025 10-K: …in which we operate; • the importance of increasing market positions in segments with growing demand; • manufacturers' ability to reconfigure and re-use equipment, resulting in diminished need to purchase new equipment and services from us, and challenges in providing parts for reused equipment; • the availability of…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.