Both companies delivered decent Q1 revenue and offered a Q2 outlook that is 5-10% lower than expectation, citing uncertainty caused by COVID-19, and a weak automotive market. However, the two companies offered very different outlooks for the full year and have a very different approach dealing with the uncertainty.
Texas Instruments, repeatedly citing the last recession in 2008, did not indicate any kind of fast recovery. However, the company chose to maintain their investment in R&D and Capex, has no plan to take production down, and build inventory for a potential recovery. STMicroelectronics is doing the exact opposite, promising a full-year outlook that is much better than feared, with a very strong revenue rebound in 2H. However, the company chose to reduce their annual Capex spending by 30%+ and take production level down, which does not support their confidence in the strong rebound promised.
We don’t have a crystal ball to know when the negative impact of COVID-19 will end, but it is interesting how two companies operate so differently in a similar challenging environment.
Esoterica's statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. For full disclosures, click here.