On Monday, JPMorgan (NYSE:JPM) initiated coverage on Vishay Intertechnology (NYSE:VSH), a manufacturer of discrete semiconductors and passive electronic components, with a Neutral rating and a price target set at $19.00.
"We are initiating coverage on shares of Vishay Intertechnology (VSH) with a Neutral rating as we currently perceive a balanced risk/reward profile," the firm said.
The firm highlighted Vishay's strong positioning to benefit from the semiconductor cycle recovery and the increasing trend of electronic content in automotive and industrial applications, which make up over 70% of the company's revenue.
Vishay's small but expanding role in AI server markets and its robust product portfolio in power semiconductors were noted as positive factors. However, JPMorgan expressed concerns about the company's growth transformation initiatives, suggesting they might limit margin and earnings potential in the medium term.
Vishay is currently transitioning from a conservative business model to a more growth-focused approach. This shift is expected to align the company with secular growth trends in power electronics. As part of this transition, Vishay plans to increase capital expenditures significantly to boost manufacturing capabilities in anticipation of demand and to raise operating expenses to improve customer alignment and support.
Despite the positive long-term outlook, JPMorgan pointed out that the recovery in Vishay's core automotive and industrial markets has been slower than expected, which could pose a risk to consensus estimates for the first half of 2025. The firm's initiation of coverage with a Neutral rating reflects a cautious stance on the company's near-term prospects, despite acknowledging its potential to capitalize on broader market trends.
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