Infineon stock target lowered at BofA on growing AI concerns

 Bank of America trimmed its price target on Infineon to €80 from €88, citing ongoing concerns over AI capex financing, monetization and potentially more restrictive data center permits, while reiterating a Buy rating after the chipmaker’s latest guidance.

The bank lowered its fiscal 2028 EV/EBITDA target multiple to 12 times from 13 times, at the upper end of the stock’s 10-year historical range, excluding COVID, of 6.5 times to 13.0 times. At the new target, Infineon would trade on about 15 times fiscal 2028 EV/EBIT, broadly in line with its historical median.

Infineon guided broadly in line with consensus, with revenue of €20 billion, a segment result margin in the mid-20% range and "close to €4bn" in data center revenue. BofA’s own forecasts are slightly above, at €20.4 billion in revenue and a 26.5% segment result margin. It cut its fiscal 2027 and 2028 earnings-per-share estimates by about 1% because of higher interest charges.

"We reiterate our Buy rating based on (A) leadership in AI/DC power semiconductors, driving margins higher for the group, (B) re-accelerating Automotive semis business and (C) reasonable valuations," BofA analysts wrote. 

Automotive was the main positive surprise. Infineon guided for mid-teens growth next year versus consensus of about 10%, despite subdued vehicle production and multiple warnings from German automakers. BofA said that reflects strong growth in software-defined vehicles, microcontrollers and Ethernet, rising EV adoption, share gains in China and restocking. High-voltage drivetrain remains a modest drag on fiscal 2027 margins.

The bank estimates about 5 percentage points of that growth comes from pricing, share gains and restocking, with the remaining 10 to 11 points from content and mix. Infineon also cited new design wins with a Japanese automaker and a U.S. EV maker.

Infineon guided adjusted gross margin to the mid-to-high 40% range. Tailwinds include AI mix, operating leverage, expanded savings and 150 basis points from lower idle costs, offsetting higher input costs, R&D and €300 million of extra depreciation.

With AI orders above its revenue guidance, BofA sees growth remaining supply constrained. A successful ramp at the Dresden plant, more outsourcing and higher CPU demand offer upside, supported by multi-year long-term agreements worth more than €10 billion.