Feeling Chipper At STM

By Gene G. Marcial

The Long Drop May Be Over
Shares of STMicroelectronics (STM ), one of the top five semiconductor makers, have slumped ever since 2000 -- from split-adjusted 74 to 19.59 now. STM appeared in this column on Oct. 11, 1999 -- at 26. A chip glut during a cyclical order downturn has battered the industry.

But lately a few pros see STM in a brighter light. On Nov. 8, Uche Orji of J.P. Morgan (JPM ) Securities in London upgraded it to "overweight." Warren Thorpe of Value Line (VALU ) says STM has "long-term appeal." And Cody Acree of Legg Mason Wood Walker kept his "buy" rating, with a 12-month target of 30. A maker of chips for computers, phones, cars, and more, STM has lifted sales and earnings "when large-cap peers weren't having much success," says Acree. He figures STM will earn 66 cents a share on sales of $8.7 billion in 2004 and $1.03 on $9.4 billion in 2005. Growth will come from strength in wireless, data storage, and consumer markets, says Acree. Morgan's Orji sees STM profiting from Nokia's (NOK ) rebound in wireless phones. Nokia makes up 17% of STM sales, and its 2005 push into camera and smart phones should be a leg up, he adds.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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