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ON Semiconductor (ON) is one of the world’s leading semiconductor companies. Valued at $30.16 billion by market cap, ON Semi designs, manufactures, and supplies semiconductor products and solutions. Its product lines include bipolar transistors, filters, FETs, diodes, and rectifiers & thyristors.
Incorporated in 1992, the Arizona-based company serves customers in the automotive, Internet of Things (IoT), personal electronics, medical, 5G & cloud power, aerospace and defense, and other computing industries.
ON stock is down about 19% YTD, as the shares have sold off recently alongside other semiconductor stocks. The shares are now trading close to the $65 level, which is former resistance that has more recently acted as support.
ON Slips on Q2 Guidance
When ON reported its Q1 results back on April 29, it posted revenue of $1.86 billion - which fell 5.10% YoY, but still beat analysts' $1.85 billion estimate. The semiconductor giant reported income of $53 million during the quarter, or $1.08 per share, which again beat Wall Street’s $1.05 per share prediction.
Gross margin fell by 1.0% during Q1 to 45.8%, while cash on hand dwindled by 3.25% to $2.61 billion.
Management also issued guidance for the second quarter, with revenue expected to range between $1.68 million to $1.78 million - which fell short of Wall Street's $1.83 million consensus. On the EPS front, ON Semi expects to report $0.82 to $0.94, compared to the $0.93 average estimate.
Gross margin is expected between 44.1% and 46.1%, while operating expenses are anticipated between $327 million to $342 million.
Investors should note that ON Semiconductor is expected to report its Q2 earnings results next week on July 29, which could spark some short-term volatility in the stock price.
ON Strikes Deal with Volkswagen
ON Semiconductor and Volkswagen Group (VWAGY) recently announced a multi-year deal to provide solutions for vehicle lineups across brands. Under the terms of the deal, ON Semiconductor will provide comprehensive power box solutions to Volkswagen for its next gen traction inverter within it Scalable Systems Platform (SSP).
Volkswagen is looking to seamlessly integrate Onsemi’s EliteSiC M3e MOSFET-based power box, enabling them to achieve higher power and efficiency in a compact design. ON Semiconductor’s Czech Republic plant will be overlooking the supply and logistics for the traction inverter systems.
This is Volkswagen's latest partnership to try and stay at the forefront of the electric vehicle (EV) race, following a recent high-profile pact with Rivian (RIVN).
What Do Analysts Say About ON Semi Stock?
Analysts are cautiously optimistic about ON Semiconductor stock, as indicated by the consensus “Moderate Buy” rating. The stock is being tracked by 28 analysts, with 15 backing a “Strong Buy” rating, 1 “Moderate Buy” rating, 10 “Hold” ratings, and 1 “Moderate Sell” and “Strong Sell” rating apiece.
The mean price target of $84.09 indicates an expected upside potential of 23.6% from current levels.
For investors looking to scoop up this semiconductor stock on the dip, it's currently a good value; ON is trading at 17.5x forward adjusted earnings, compared to the sector median of 23.86x.
On the date of publication, Ruchi Gupta 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.
