ON Semiconductor Corp (ON) shares experienced a rollercoaster ride in early trading on Tuesday, even after the company unveiled positive third-quarter revenue results. This comes amid a flurry of corporate earnings reports, making this an exciting season for investors. But what are key analysts saying about ON Semiconductor’s performance and outlook? Let’s delve into their insights.
Needham’s Optimism Amid Challenges
Analyst Quinn Bolton at Needham maintained a Buy rating for ON Semiconductor, albeit with a reduced price target from $92 to $87. While acknowledging “solid” results, Bolton pointed towards a flattish fourth quarter forecast, attributing it to persistent inventory digestion and demand weakness across the company’s end markets. He expects an “L-shaped” recovery to stretch through the first half of 2025, with strength in the Automotive and Industrial sectors unable to fully offset broader demand softness. Nevertheless, Bolton highlights the growing importance of the data center sector, where ON Semiconductor has secured significant wins with three out of the four leading hyperscalers in North America. These design wins are projected to gain momentum in 2025.
Goldman Sachs: Cautious Optimism
Toshiya Hari from Goldman Sachs echoed the Buy rating for ON Semiconductor, alongside an increased price target from $89 to $92. Hari attributes ON Semiconductor’s outperformance to resilience in select Industrial applications and robust demand in the China EV market, mitigating weaknesses in other areas. The company’s $1.76 billion revenue, up 2% sequentially but down 19% year-on-year, exceeded expectations. While the fourth-quarter revenue guidance fell short of analysts’ expectations, Hari emphasizes the company’s secular growth and long-term potential for margin improvement. These factors, he believes, will drive substantial earnings growth exceeding the industry average in the medium to long term.
Benchmark: A Mix of Strength and Weakness
David Williams at Benchmark reaffirmed his Buy rating and maintained a $90 price target. Despite exceeding revenue expectations modestly, ON Semiconductor’s fourth-quarter guidance fell slightly below consensus, driven by ongoing demand softness and inventory digestion in the Auto and Industrial sectors. However, Williams highlights the company’s market share gains and content expansion, fueled by new EV design wins entering production. He notes that China’s demand is showing strength, while Europe and North America remain sluggish. Silicon carbide (SiC) remains a bright spot, projected to grow at a low to mid-single-digit pace this year, despite a roughly 14% decline in total revenue.
JPMorgan: Stability and Long-Term Potential
Harlan Sur from JPMorgan retained a Neutral rating and a $88 price target. Sur views ON Semiconductor’s anticipated “L-shaped” recovery as unfolding as expected. While the near-term demand outlook appears muted, he notes a broader recovery in China. The analyst aligns ON Semiconductor’s commentary with the broader diversified semiconductor sector and his own expectations. Revenue trends are expected to stabilize throughout the remainder of 2024 and accelerate in 2025.
ON Semiconductor Price Action
At the time of publication on Tuesday, ON Semiconductor shares were up 0.9% at $72.90. As analysts navigate the current demand environment, it will be interesting to observe how ON Semiconductor’s performance and stock price evolve in the coming months.
