Laser Focus World is an industry bedrock—first published in 1965 and still going strong. We publish original articles about cutting-edge advances in lasers, optics, photonics, sensors, and quantum technologies, as well as test and measurement, and the shift currently underway to usher in the photonic integrated circuits, optical interconnects, and copackaged electronics and photonics to deliver the speed and efficiency essential for data centers of the future.

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Editorial Advisory Board

  • Professor Andrea M. Armani, University of Southern California
  • Ruti Ben-Shlomi, Ph.D., LightSolver
  • James Butler, Ph.D., Hamamatsu
  • Natalie Fardian-Melamed, Ph.D., Columbia University
  • Justin Sigley, Ph.D., AmeriCOM
  • Professor Birgit Stiller, Max Planck Institute for the Science of Light, and Leibniz University of Hannover
  • Professor Stephen Sweeney, University of Glasgow
  • Mohan Wang, Ph.D., University of Oxford
  • Professor Xuchen Wang, Harbin Engineering University
  • Professor Stefan Witte, Delft University of Technology

3 Reasons NXPI is Risky and 1 Stock to Buy Instead

NXPI Cover Image

NXP Semiconductors trades at $226.70 and has moved in lockstep with the market. Its shares have returned 19.3% over the last six months while the S&P 500 has gained 18.8%.

Is there a buying opportunity in NXP Semiconductors, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Is NXP Semiconductors Not Exciting?

We're cautious about NXP Semiconductors. Here are three reasons you should be careful with NXPI and a stock we'd rather own.

1. Revenue Tumbling Downwards

Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. NXP Semiconductors’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 4.1% over the last two years. NXP Semiconductors Year-On-Year Revenue Growth

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect NXP Semiconductors’s revenue to rise by 5.3%. While this projection implies its newer products and services will spur better top-line performance, it is still below average for the sector.

3. Free Cash Flow Margin Dropping

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, NXP Semiconductors’s margin dropped by 8.4 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. NXP Semiconductors’s free cash flow margin for the trailing 12 months was 16.3%.

NXP Semiconductors Trailing 12-Month Free Cash Flow Margin

Final Judgment

NXP Semiconductors isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 18.2× forward P/E (or $226.70 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere. Let us point you toward our favorite semiconductor picks and shovels play.

Stocks We Would Buy Instead of NXP Semiconductors

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Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.

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