What: Shares of NXP Semiconductor (NXPI 1.29%) fell about 12% during the month of June, according to S&P Capital IQ data. The pullback appears to be the market giving up some of NXP's recent gains, as shares have been steadily rising since the release of Apple's iPhone 6 and 6 Plus. As an iPhone component supplier, NXP has been enjoying the ride.
NXP Semiconductors June stock chart, data by YCharts.
So what: For instance, shares had jumped 11% during May, so the valuation just may be getting a little ahead of itself. In recent months, whenever a report surfaces that the iPhone 6 and 6 Plus continue to sell well, shares of numerous iPhone suppliers jump. In May, Morgan Stanley analyst Katy Huberty put out a research note saying that she expects the Mac maker to sell 50 million iPhones in the June quarter, triggering a rally among suppliers like NXP.
Then NXP said it would sell its RF unit for $1.8 billion to ease regulatory concerns about its proposed merger with FreeScale (NYSE: FSL). The sale would also help raise capital to pay for costs associated with the deal. NXP also sold some unsecured debt in early June to raise even more cash.
Now what: Ultimately, June's decline will likely prove to be but a blip in the radar. Some volatility can be expected when you consider that NXP is up 42% during the past year, even after the pullback. NXP CEO Rick Clemmer has been making the rounds talking up the FreeScale deal, as the combined company will be positioned to dominate the Internet of Things component market, which is set to put up incredible growth in the years to come. On top of that, NXP will benefit from the continued rise of mobile payments, because it provides many of the chips that make contactless payments possible. For what it's worth, Bernstein Research is still highly optimistic about the company's prospects, initiating coverage in May with an outperform rating and a $133 price target.
