- Retraced c.22% from range highs on the back of recent autos tariff news
- Cyclicals vs. defensives underperformance may be overdone in the short term
- Potential for a rebound to mid-range levels if reciprocal tariffs are not as aggressive as expected
Revisiting our latest idea, IFX – Long Feb25 34/36 Call spreads for a tactical rebound ahead of results, Infineon has retraced its entire post-earnings rally from 4 February, losing 22% from late-February highs after the US imposed a 25% tariff on foreign autos in March. Spot is now hovering near range lows, with the stock’s RSI falling briefly below 30 yesterday. The broader market sell-off, fuelled by fears of aggressive reciprocal tariffs from the US on 2 April, has hit cyclicals over the past few weeks, with the market rotating to defensive names as recession probabilities continue to be repriced upwards.
With automotive chips driving a hefty slice of its revenue, the market seems to have baked in a worst-case scenario for autos —crippled supply chains, shrinking margins and slumping demand. But this drop may look overdone in the short term, opening the door for a potential rebound should Trump announce less aggressive reciprocal tariffs than expected, and while autos face a 25% hit, broader reciprocal measures might spare key sectors or European allies, fuelling a broader market rebound. With spot at range lows, we see a high probability of the stock revisiting mid-range levels, as it typically mean reverts after significant drops. The company also reports its fiscal 2Q25 results on 8 May, which could provide further upside should it maintain its previously raised FY 2025 revenue guidance amid the ongoing market pessimism.
We propose May25 33 calls at a net cost of 3.4% of underlying (Spot ref: 30.5, Fut. 30.7)