ON Semiconductor is the IBD Stock Of The Day as the chipmaker outperforms the broader market and sets a new buy point.
The Phoenix-based company, also known as Onsemi, has seen its shares pull back after hitting a record high of 76.78 on Aug. 25. It climbed to that all-time high after delivering a beat-and-raise second-quarter report on Aug. 1.
On the stock market today, ON stock rose 0.9% to close at 69.51. It appears to have found support at its 50-day moving average line.
In a positive sign, the relative strength line for ON stock is hitting new highs as it outperforms the S&P 500 index. The action is highlighted with a blue dot on a weekly MarketSmith chart.
Onsemi makes power control and sensing chips for automotive, industrial and other applications.
Onsemi Earnings On A Roll
In the June quarter, Onsemi's adjusted earnings rose 113% year over year to $1.34 a share. It was the company's sixth straight quarter of triple-digit gains in earnings per share. Meanwhile, its sales increased 25% to $2.09 billion in the second quarter.
For the third quarter, Onsemi forecast adjusted earnings of $1.31 a share on sales of $2.12 billion. That would translate to year-over-year growth of 51% in earnings and 22% in sales.
ON stock has been consolidating for the past seven weeks with a buy point of 76.88, according to IBD MarketSmith charts.
ON Stock Ranks First In Group
Wall Street analysts have been cautious about semiconductor companies given the market uncertainty. However, Mizuho Securities analyst Vijay Rakesh said in a note Sunday that he likes Onsemi because of its exposure to the fast-growing electric vehicle market. He rates ON stock as buy with a price target of 72.
"We believe ON is well positioned for industrial growth and is an EV and camera automotive content story with additional tailwinds from servers and computing," Rakesh said. "The company has significant opportunities to expand its top line as well as drive EPS as gross margins continue to trend better."
ON stock is on IBD's Tech Leaders list. It's also on the IBD 50 and Big Cap 20 stock lists. Onsemi has an IBD Composite Rating of 98 out of 99, according to IBD Stock Checkup. It ranks first out of 33 stocks in IBD's chip manufacturing industry group.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
