Onsemi is the IBD Stock Of The Day as the chipmaker touched two buy points after its beat-and-raise quarterly report this week before retreating somewhat. ON stock was up Tuesday.
Phoenix-based Onsemi early Monday beat Wall Street's targets for the second quarter and guided higher for the current period. But ON stock fell 4.7% to close at 63.66 as investors weighed a possible dip in gross profit margin in the current quarter.
In Tuesday trades on the stock market today, ON stock rebounded above the buy points. But it pared some gains and ended the day 3% higher to close at 65.59.
Previously known as ON Semiconductor, Onsemi makes power control and sensing chips for automotive, industrial and other applications. The company is benefiting from megatrends such as vehicle electrification, energy infrastructure upgrades and factory automation.
ON Stock Showing Three Buy Points
IBD analysis indicates that ON stock formed a double-bottom base with a buy point of 67.29. That base is within a 30-week consolidation period with a buy point of 71.35, according to IBD MarketSmith charts.
Also, Onsemi shares cleared an early entry just above 67 on Tuesday as they broke through a resistance level, but came back below that level by the close.
The relative strength line for ON stock has been rising as it has outperformed the S&P 500.
Onsemi has posted six straight quarters of triple-digit percentage gains in earnings on a year-over-year basis.
At least 11 Wall Street analysts raised their price targets on Onsemi shares after the company's second-quarter report.
Opportunity To Lead In Silicon Carbide Chips
In a note to clients, Piper Sandler analyst Harsh Kumar said Onsemi is on track to become a leader in silicon carbide chips. Those next-generation chips will lead to oversize growth and increased profitability, he said. He rates ON stock as overweight, or buy, with a price target of 75.
Needham analyst Rajvindra Gill reiterated his strong buy rating on Onsemi and raised his price target to 80 from 60. He is impressed by the company's positioning in silicon carbide, or SiC, chips for automotive applications.
"The company-specific driver behind Onsemi's SiC demand is technology differentiation," Gill said in his note to clients. "Customers are able to develop systems with longer battery life (and range) using ON's solution. We know mile range per charge is currently the paramount metric for EV (electric vehicle) makers."
ON stock ranks second out of 31 stocks in IBD's semiconductor manufacturing industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 97 out of 99.
IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
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