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Valued at a market capitalization of $2.6 billion, Vishay Intertechnology (VSH) manufactures and supplies discrete semiconductors and passive electronic components in Asia, Europe, and the Americas. Its product portfolio includes diodes, power-integrated circuits, power modules, and more. Vishay serves companies in multiple sectors, including industrial, computing, automotive, consumer, telecom, military, aerospace, and healthcare.
VSH stock has underperformed the broader markets significantly over the last two decades. Since December 2006, the tech stock has returned less than 70% to shareholders, even after we account for dividend reinvestments. Comparatively, the S&P 500 Index ($SPX) has returned over 600% to investors in this period.
However, as past returns don’t matter much to current or future investors, let’s see if VSH stock should be a part of your equity portfolio right now.
Vishay Navigates the Semiconductor Downcycle
In the third quarter of 2024, Vishay reported revenue of $735.4 million, which was flat year-over-year. While its top-line growth is sluggish, Vishay emphasized that it is destocking its inventory amid slower industrial demand.
However, Vishay is positioning itself for future growth based on its 3.0 strategy - a plan to reach its financial targets at a lower cost - and rising demand for artificial intelligence (AI) servers, particularly in Asia. Its Opto products have experienced strong demand in China, while the company is set to benefit from larger orders in the smart grid infrastructure, aerospace, and defense verticals.
During the recent semiconductor downturn, Vishay has invested in expanding its production capacity and product portfolio, with a strong focus on cash flow and profitability. Moreover, Vishay is gaining traction in Asia, which has helped it offset weakness in Europe.
How Nvidia Blackwell Could Benefit Vishay Stock
In a recent note, TF International Securities analyst Ming-Chi Kuo named Vishay as a “hidden key winner” due to robust demand for Nvidia’s (NVDA) Blackwell chips. Kuo noted that Vishay has replaced Infineon (IFNNY) as Nvidia’s supplier for its graphics cards, which are planned for mass production next year, making VSH a key supplier for the $3 trillion chip giant.
Vishay has already secured orders from Nvidia, which should significantly increase its revenue. In fact, demand for Nvidia’s AI products might account for at least a fifth of company sales in 2025.
Is Vishay Stock Undervalued?
Only two analysts currently track VSH stock, with split opinions - one has a “strong buy” rating, and the other has a “moderate sell” recommendation. The average target price for VSH stock is $21, indicating upside potential of about 11% from current levels.
Vishay has successfully navigated an uncertain and challenging macroeconomic environment. Its focus on growth markets such as AI, electric vehicles, and smart grid infrastructure should help it drive sales and cash flows higher.
Analysts tracking the tech stock expect adjusted earnings per share to fall from $2.44 in 2023 to $0.55 in 2024. However, its earnings are forecast to expand to $1.75 per share in 2026. So, priced at 10.5 times forward earnings, VSH stock is fairly valued, if it can grow its profit margins over time.
