Analog stock targets raised at Mizuho ahead of Q2 earnings

Mizuho has raised price targets for several analog semiconductor companies, including Allegro, Microchip, NXP, and Texas Instruments, citing an anticipated bottoming of the auto-industrial cycle and improving pricing dynamics for the second half of 2025. The firm projects the June quarter as the "bottom for analog" with a stronger September quarter outlook, expecting 4-5% quarter-over-quarter growth and a 7% half-over-half revenue upside for H2 2025. Additionally, Mizuho forecasts global BEV light vehicle production to increase 15% year-over-year in 2025, primarily driven by China, though it cut Tesla's target to $375 due to slowing sales headwinds.

Analysis

Mizuho has issued a strongly positive outlook on the analog semiconductor sector, raising price targets for key players including NXP Semiconductors (NXPI), Texas Instruments (TXN), Microchip (MCHP), and Allegro MicroSystems (ALGM). The firm's core thesis is that the auto-industrial cycle is bottoming, with the June quarter marking the trough before a recovery. Mizuho anticipates June quarter revenues to align with consensus growth of 4-5% quarter-over-quarter, followed by an improving September quarter outlook supported by a potential 5% sequential increase in supply chain pricing. This recovery is projected to drive a 7% half-over-half revenue upside for the second half of 2025. The upgrades are supported by company-specific catalysts, such as Texas Instruments' ability to work through elevated inventories amid better demand, and NXP's exposure to strong automotive demand. This optimism is underpinned by a forecast for 15% year-over-year growth in global BEV light vehicle production in 2025, largely driven by China and a 25% year-to-date rise in EU BEV registrations. In a notable divergence, Mizuho cut its price target on Tesla (TSLA) to $375, citing headwinds from slowing sales, despite its leadership position in the U.S. EV market.

Key Decisions for Investors

• Investors should consider initiating or increasing exposure to auto and industrial-focused analog semiconductor stocks such as NXPI, TXN, and MCHP to position for the anticipated cyclical recovery in the second half of 2025.
• The contrasting analyst sentiment between bullish component suppliers and a bearish outlook for Tesla suggests a potential pairs trade strategy, favoring the semiconductor ecosystem over specific OEMs facing sales growth challenges.
• Monitor upcoming quarterly earnings reports from these semiconductor firms for confirmation of a revenue bottom, paying close attention to forward guidance on pricing, inventory destocking progress, and order book trends for the September quarter.
• While the global BEV production forecast is robust, note the reliance on Chinese and European market strength, which introduces geopolitical and regional economic risks to the demand outlook for these semiconductor suppliers.