Melexis We stick to our conviction, but brace for a bumpy ride

Melexis shares experienced a decline on the day of their results, erasing the gains made the previous day following positive sentiment from Infineon. This drop was attributed to the 4Q24 sales of €197.4m, which fell short of guidance. During this quarter, Melexis collaborated with its automotive customers to significantly reduce their inventories. The company did not meet its original FY24 sales target of approximately €1 bn, which they described as "disappointing." Despite ongoing customer inventory corrections in the first half of 2025, Melexis remains cautiously optimistic that customer demand will begin to improve around the summer.

We reiterate our Buy rating, albeit with a slightly lower Target Price (€76 compared to €85 previously). We anticipate that the stock may experience volatility in the coming months. However, we view potential share weaknesses as buying opportunities, aiming to position ourselves ahead of the re-rating of automotive semiconductor stocks relative to other chip stocks over the next 12 months. We expect the market to look beyond near-term weaknesses and begin pricing in the next upcycle, particularly for automotive semiconductor stocks.