BofA eyes €86 target, 46% margins for STMicroelectronics
STM•Bank of America upgraded STMicroelectronics shares to Buy from Neutral with a €86 price target, citing underestimated earnings power over the next three years. Analysts model EPS at $1.57, $3.53 and $4.63, driven by optical interconnects scaling to $2.3b, LEO satellite revenues of $3.6b and margin expansion to 46%.
1. BofA Upgrade Details
Bank of America upgraded STMicroelectronics to Buy from Neutral, raising its price target to €86. STM shares jumped 2.5% in Paris trading following the upgrade.
2. Earnings Forecasts and Drivers
Analysts project EPS of $1.57 in 2026, $3.53 in 2027 and $4.63 in 2028, representing a 30% to 43% premium over consensus. The upgrade rests on optical interconnect expansion, LEO satellite leadership, recovering automotive and industrial demand, and operating leverage from spare capacity.
3. Optical Interconnect Growth
The bank expects STM's optical interconnect unit to grow from $670 million this year to $2.3 billion by 2028, driven by 300mm silicon photonics manufacturing, specialty processes and advanced packaging. Market share in silicon photonics is forecast to increase from roughly 5% to over 30%, anchored by Amazon Web Services.
4. Satellite Market and Margin Expansion
STM currently holds about 90% of the LEO satellite market, with cumulative revenues forecast at $3.6 billion through 2028, above company guidance. Gross margins are expected to rise from 37.3% this year to 46% by 2028, supported by falling capacity costs and higher-margin end markets. Valuation is set at 13x 2028 EV/EBITDA, a 12% discount to peers.
