NXP Semiconductor Breakout?

10/22/2013 7:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Our latest featured stock is poised for a technical breakout; it is in an eight-week flat base and in good position to move to a new all-time high, supported by strong profits, suggests technician Leo Fasciocco, editor of Ticker Tape Digest.

Netherlands-based NXP Semiconductors (NXPI) makes high performance mixed signal semiconductor solutions to meet the requirements of systems and sub-systems in its target markets.

High performance mixed signal solutions are an optimized mix of analog and digital functionality integrated into a system or sub-system.

The company's expertise is in radio frequency, analog, power management, interface, security, and digital processing products. Its solutions are used in automotive, identification, wireless infrastructure, lighting, industrial, mobile, consumer, and computing applications.

The company has research and development activities in Asia, Europe, and the US, and manufacturing facilities in Asia and Europe.

The company has topped the Street estimate the past five quarters by a significant amount. In the prior quarter, it topped the consensus by $.04 cents a share and before that by $.19 cents a share. Impressive!

For the year, analysts are forecasting a 70% surge in profits to $2.89 a share from $1.70 a year ago. Going out to 2014, profits are projected to climb 26% to $3.63 a share from the anticipated $2.89 this year.

The stock sells with a price-earnings ratio of just 13. We see that as extremely low, making the stock a very good value-growth play.

The stock went public in September of 2010 and trading around $11, and advanced strongly to $35 by early 2011. However, it then fell back $13 in October of 2011.

Since then, the stock has been pushing higher. It just needs to get over $39.46 to hit a new all-time high. The stock has since formed a flat base above its rising 50-day moving average line. That is an ideal setup for a breakout.

We suggest accumulation of a partial stake with further buying to be done on a breakout over $39.40. We are targeting NXPI for a move to $48 after a breakout. A protective stop can be placed near $36 after a breakout.

Institutional sponsorship is excellent. The largest fund buyer recently was T. Rowe Price Capital Appreciation Fund, 5-star rated, which purchased 2.4 million shares. Its buy was a new position. Another key buyer was 4-star rated T. Rowe Price Value Fund which bought 1.5 million shares.

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