Credit Suisse Reiterates Outperform Ratings on NXP Semiconductors NV (NXPI) and Microsoft Corporation (MSFT); Here’s Why

NXP Semiconductors NV

NXP Semiconductors NV (NASDAQ:NXPI) has been looking for a potential buyer to take their Standard Products (SP) business off their hands. The big question around the deal is the purchase price. Analyst John W. Pitzer of Credit Suisse believes SP is worth no less than $3 billion. Pitzer reiterated an Outperform rating on the stock with a $120 price target.

The analyst cites Bloomberg’s recent report of NXPI’s possible intention to sell SP for approximately $2 billion to contacts from China. Pitzer believes this price is unwarranted relative to the potential gains, stating, “We believe a $2.0bn purchase price would undervalue the asset as NXPI’s SP division is SIGNIFICANTLY more profitable than peers.” The analyst points to the company’s operating margins as evidence for the undervalue.

Pitzer sees NXPI as an outstanding company, and has a particularly favorable view on its operations. He states, “We continue to view NXPI as one of the best returns story in Our Coverage Universe – margin expansion, balance sheet delivering and premium growth all at a discounted multiple.”

According to TipRanks, John W. Pitzer has a 62% success rate and delivers an average return per recommendation of 14%. Overall, nine analysts including Pitzer remain on the Buy ratings side of NXPI. The average 12-month price target for all recommendations is $109, marking a 31% upside from current levels.

Microsoft Corporation

Credit Suisse’s Philip Winslow weighed in on Microsoft Corporation (NASDAQ:MSFT) following recent Q1 market data that suggests a 9.6% to 11.5% decline in PC unit shipments. Such a dip stirs up reasonable concerns for the analyst. However, he provides an insight on a coming stabilization for the company. Winslow reiterates an Outperform rating on the stock with a price target of $62.50.

The analyst first provides several drivers that could positively influence the company’s hardware revenues, despite the current weak shipments. His list goes as follows, “(1) stabilizing Windows ASPs after heavy uncertainty in late 2014 and early 2015, (2) the ramping of production of Skylake by Intel, (3) a slowing negative substitution effect from tablets, (4) increased popularity of hybrid laptops (e.g., Surface Pro and Surface Book), and (5) the potential of a faster upgrade cycle to Windows 10 among business and enterprise users as compared with prior versions of Windows, which could begin in H2 2016 and ramp through 2017.”

Winslow also sees potential double digit growth in EPS given that Microsoft uses its cards right. The analyst provides another set of possible events that will position Microsoft back in the lead. He adds, “(1) continued rationalization of its cost structure, (2) further divestitures/exits/de-emphasis of non-core businesses, (3) optimization of its capital structure, (4) stabilization in Windows pricing, and (5) an accelerating shift to Office 365 (which we believe has reached a key inflection point in adoption, as the company began to grow Office 365 subscriptions at a faster absolute dollar rate than license declines).”

According to TipRanks, Philip Winslow’s recommendations are profitable 56% of the time, delivering an average return per recommendation of 5.3%. fourteen other analysts join Winslow in giving Microsoft a Buy rating, five remained on the sidelines and two gave the stock a Sell rating. All price targets average at $58.02, marking a 7.07% upside from current levels.

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