STMicro shares jump on prospects for second half of 2019

By Mathieu Rosemain and Gwenaëlle Barzic

PARIS (Reuters) - Shares in chipmaker STMicroelectronics jumped on Thursday after the Franco-Italian company gave an upbeat forecast for the second half of the year, easing market fears about a downturn in the semiconductor industry.

The Geneva-based company saw a return to revenue growth in the second quarter which it said would gain pace in the second half of the year, offsetting gloomy guidance for the first three months of 2019.

It expects strong demand for its automotive sensors and power semiconductors to offset any decline for smartphone chips.

STMicro was the top performer on France's benchmark stock index CAC 40 as of 0930 GMT, climbing by more than 8 percent and valuing the group at 11.4 billion euros ($13 billion).

Investors also welcomed STMicro's fourth-quarter profitability, which came slightly above expectations despite a slowdown in net revenues.

"Linked to what is specific to our company, we have a good confidence level to have a strong acceleration in second-half this year," Chief Executive Officer Jean-Marc Chery said in a call with analysts.

On first-quarter guidance, the company joined an increasingly number of companies issuing downbeat forecasts.

STMicro said it expected first-quarter sales to fall by about 21 percent from the last quarter of 2018, adding to a note of gloom led by Taiwan Semiconductor Manufacturing Co (TSMC), which also cut quarterly sales guidance.

Another peer, Dallas-based Texas Instruments, missed estimates for quarterly revenue on Monday, forecasting first quarter revenue and profit below estimates.

APPLE FEARS

Key drivers for global demand for chips, such as iPhone maker Apple which is one of STMicro's top clients, have signalled a slowdown in sales from China. That has fuelled concerns that the sector could spiral downwards.

Asian clients who buy STMicro's microcontrollers, mass-market chips found in washing machines and microwave ovens, are also using current inventories rather than making new orders, thereby hitting sales further.

Chery said in the call that he expected this negative impact on inventories to end in the second quarter.

The growing demand for self-driving vehicle sensors and silicon-carbide semi-conductors, which are aimed at making electric vehicles more independent, failed to offset the slowdown for other products in the last quarter.

STMicro expects between $1.2 and $1.3 billion in capital expenditure in 2019 and to post first-quarter revenues of about $2.1 billion.

STMicro said fourth-quarter net revenues rose by 5 percent from the previous quarter to $2.65 billion, below its targets. The gross margin for the period stood at 40 percent.

($1 = 0.8800 euros)

(Reporting by Mathieu Rosemain and Gwenaelle Barzic; Editing by Sudip Kar-Gupta/Keith Weir)