BofA downgrades Nordic Semi to “underperform,” cuts PO to NOK 99

July 03, 2025 08:44 PM AEST | By EODHD

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BofA downgrades Nordic Semi to “underperform,” cuts PO to NOK 99 — Image source: Kalkine Media

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Investing.com -- BofA Securities has double-downgraded Nordic Semiconductor (OL:NOD) to “underperform,” citing weak IoT market conditions, low visibility, and consensus estimates that it sees as too optimistic. The brokerage also cut its price objective to NOK 99 from NOK 139, based on an unchanged 18x FY26 EV/EBITDA, within Nordic’s historical valuation range of 11–31x, excluding the COVID period. BofA’s FY25 and FY26 EBITDA estimates are 24% and 20% below consensus, respectively. The stock is trading at 26x FY26E EV/EBITDA, near the high end of its historical range, raising valuation concerns. The downgrade follows management commentary from Nordic’s September 2024 Capital Markets Day, where the company guided for “modest growth” in 2025 with limited contribution from the new nRF54 Series and did not support claims of accelerated growth in 2026.

Despite Q1 revenue rising 108% year over year and Q2 guidance indicating a 21% gain, BofA sees the Q1 performance as atypical, driven by large individual customer orders, not broad-based demand. BofA argues that consensus expectations for FY25 and FY26 revenue growth of 23% and 21% are too high. It projects 15.5% and 19.5%, citing weakening consumer demand, elevated distributor inventories at partners such as Avnet (NASDAQ:AVT) and Arrow, and uncertainty over the impact of price hikes at major customers like Logitech (NASDAQ:LOGI). Broad market recovery remains slow. Nordic stated that revenue from outside its top 10 customers was still about 40% below peak in Q1 and that growth in this segment may take “some time” to return.

The lack of a significant ramp in nRF54 and high customer concentration could increase volatility, especially given Nordic’s short lead times. Competition in China, which accounts for roughly 10% of Nordic’s revenue, adds further pressure, with pricing dynamics limiting any rebound in revenues to peak levels. Additionally, GlobalFoundries (NASDAQ:GFS), a key foundry partner, said on its Q1 earnings call that while IoT revenue had returned to year-over-year growth, the outlook for the second half remains cautious. It expects full-year IoT demand to be flat, underscoring lingering market uncertainties. BofA flagged this as a negative signal for demand related to Nordic’s BLE and Wi-Fi chips.

Given weak end-market conditions, limited visibility on volume recovery, and risks from both customer concentration and geographic exposure, BofA sees a challenging setup for the stock.

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