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Based in Scottsdale, Arizona, ON Semiconductor Corporation (ON) operates with a market cap of $29.7 billion in the semiconductor industry. The company specializes in intelligent sensing and power solutions, providing a wide range of discrete and embedded semiconductor components.
Shares of the chipmaker have notably fallen behind the broader market over the past 52 weeks. ON has plunged 32.6% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 15.8%. In 2024, ON is down 17.4%, compared to SPX's 8.7% gain on a YTD basis.
Zooming in further, ON has also underperformed the S&P Semiconductor SPDR's (XSD) 5.5% decline over the past 52 weeks. Moreover, the exchange-traded fund's nearly 8% drop on a YTD basis is much less pronounced than ON’s double-digit dip over the same time frame.
ON Semiconductor’s underperformance stems from its high capital intensity, which has strained its free cash flow amid significant investments in silicon carbide technology and manufacturing capabilities. Nevertheless, the stock jumped 11.5% on Jul. 29 due to better-than-expected Q2 results. The gain was further driven by positive guidance for the third quarter and a major multiyear supply agreement with Volkswagen, positioning ON as a key supplier of silicon carbide power chips for EVs.
For the current fiscal year, ending in December, analysts expect ON’s EPS to decline 22.3% year over year to $4.01. The company's earnings surprise history is promising. It beat the consensus estimates in each of the last four quarters.
Among the 28 analysts covering the stock, the consensus rating is a “Moderate Buy.” That’s based on 15 “Strong Buys,” one “Moderate Buy,” 10 “Holds,” one “Moderate Sell,” and one “Strong Sell.”
This configuration is slightly less bullish than three months before, with 16 analysts suggesting a "Strong Buy."
On Jul. 30, Roth MKM raised its price target for ON Semiconductor to $100 and maintained a "Buy" rating following its impressive Q2 earnings report that highlighted improving channel inventories and recovering demand, particularly in China’s automotive and renewable markets.
The mean price target of $86.87 represents a premium of roughly 26% to ON's current levels. The Street-high price target of $106 suggests that the stock could rally as much as 53.7% from here.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
