/ON%20Semiconductor%20Corp_%20sign%20in%20Silicon%20Valley-by%20Sundry%20Photography%20via%20Shutterstock.jpg)
Scottsdale, Arizona-based ON Semiconductor Corporation (ON) is an equipment manufacturer of a broad range of discrete & embedded semiconductor components. Valued at a market cap of $21.4 billion, the company’s product lines include bipolar transistors, diodes, filters, FETs, rectifiers & thyristors, among others.
This semiconductor company’s shares have massively lagged behind the broader market over the past 52 weeks. ON has declined 29% over this time frame, while the broader S&P 500 Index ($SPX) has gained 20.9%. Moreover, the stock is down 20.3% on a YTD basis, compared to SPX’s 1.9% rise during the same time frame.
Zooming in further, ON’s underperformance becomes more evident when compared to the Technology Select Sector SPDR Fund’s (XLK) 12.6% return over the past 52 weeks and 2.1% fall on a YTD basis.
On Jan. 31, chip stocks saw a decline as Treasury note yields rose. Among them, ON Semiconductor shares dropped nearly 1.8%. Moreover, on Jan. 10, shares of ON crashed 7.5% after a Truist analyst downgraded the stock's rating from Buy to Hold and lowered the price target from $85 to $60, citing weaker demand trends.
Nonetheless, on Oct. 28, ON’s shares closed up 1.4% after delivering better-than-expected Q3 adjusted EPS of $0.99 and revenues of $1.8 billion. However, the top line declined 19.2% year-over-year due to a drop in revenues across all of its reportable segments. Moreover, its adjusted operating margin contracted by 440 bps, leading to a massive 28.8% fall in its bottom line figure.
For the fiscal year, which ended in December, analysts expect ON’s EPS to decline 22.5% year over year to $4. The company’s earnings surprise history is promising. It surpassed the Wall Street estimates in each of the last four quarters.
Among the 31 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on 16 “Strong Buy,” one “Moderate Buy,” 12 “Hold,” one “Moderate Sell,” and one “Strong Sell” rating.
This configuration is slightly more bullish than three months ago, with 15 analysts suggesting a “Strong Buy” rating.
On Oct. 18, Mizuho Securities maintained an “Outperform” rating on ON but lowered its price target to $85, which indicates a 69.1% potential upside from the current levels.
The mean price target of $79.75 represents a 58.7% upside from ON’s current price levels, while the Street-high price target of $107 suggests an upside potential of 112.9%.
