On Tuesday, B. Riley revised its outlook to: ON Semiconductor (NASDAQ:), lowered the company’s price target from $106.00 to $100.00, while maintaining a buy rating. The company’s analysis follows ON Semiconductor’s third-quarter earnings report, which beat consensus estimates. However, the company’s fourth-quarter outlook was slightly lower due to lower auto industry sales and the impact of traditional industrial demand.
The analyst noted that ON Semiconductor’s new automotive silicon carbide (SiC) program is progressing as planned despite the softening short-term outlook for autos. Additionally, the company is growing in long-term industrial markets such as solar power and data centers. The company also highlighted ON Semiconductor’s operating efficiencies, including improved cost of goods sold (COGS), operating expenses, cash flow and cash returns, as indicators of the company’s strong performance during the economic trough.
ON Semiconductor’s year-to-date stock performance prior to its third-quarter earnings release was down 15%, compared with a 25% gain for the Semiconductor Index (SOX), and an average gain of 14% for large-cap Analog & compared with. interface (NASDAQ:) (A&I) powered peers. The analyst said this underperformance, along with a consensus price-to-earnings ratio of 15.3 times over the next two years, presents an opportunity to “buy on the edge.”
Market reaction to ON Semiconductor’s earnings report was initially positive, with the stock rising 3%. However, sentiment changed to a 4% decline during the conference call due to revised 2H24 forecasts for the Automotive SiC sector. The stock has since recovered slightly as the company’s auto market share and new programs appear to be on track.
B. Riley’s revised sales and EPS estimates for ON Semiconductor are extended to 2027 to account for the company’s long-term gross margin target of 53.0%. Although the price target was lowered to $100, the company still has 33% upside potential over the next 12 months, reaffirming its Buy rating.
The report provides perspectives from both bears who see SiC headwinds likely to intensify, and bulls who are encouraged by new customer introductions and manufacturing options, as well as the company’s growth in advanced driver assistance systems (ADAS). I have summarized the possibilities. Safety standard upgrades for 2027 models in the US and Europe.
In other recent news, ON Semiconductor has made a series of developments. The company reported strong third-quarter 2024 results, exceeding expectations due to a strong Chinese electric vehicle market and sustained demand in certain industrial sectors. Goldman Sachs highlights the company’s involvement in areas such as silicon carbide for electric vehicles and CMOS image sensors for advanced driver assistance systems, and Goldman Sachs raises its price target to $92.00. .
At the same time, Trust Securities lowered ON Semiconductor’s price target to $89.00, but maintained a Buy rating. The company noted that despite the revision to its silicon carbide growth outlook, ON Semiconductor remains on track to achieve double-digit earnings per share growth throughout the business cycle due to significant operating leverage.
On the revenue front, ON Semiconductor reported a slight increase in revenue to $1.76 billion, marking 2% quarter-over-quarter growth. The company’s commitment to operational excellence was demonstrated by free cash flow increasing 41% sequentially, with 75% of this flow being returned to shareholders. The company expects fourth-quarter sales to be between $1.71 billion and $1.81 billion, with non-GAAP gross margins between 44% and 46%. Auto sales are expected to increase by low to mid-single digits, even though sales are expected to be flat.
Investment Pro Insights
To complement B.Riley’s analysis of ON Semiconductor (NASDAQ:ON), recent data from InvestingPro provides additional context. The company’s market capitalization is $30.76 billion, and its P/E ratio, which reflects the current market valuation, is 17.66 times.
InvestingPro Tips highlights ON Semiconductor’s position as a prominent player in the semiconductor and semiconductor equipment industry, consistent with articles focused on the company’s automotive and industrial market segments. The stock has seen strong returns over the past week, with the stock’s total return for the week at 8.57%, according to data from InvestingPro. This recent rally is particularly interesting considering the article mentions the stock’s initial positive reaction to the earnings release.
Another related InvestingPro Tip notes that analysts expect sales to decline this fiscal year, which is part of our article on a softening near-term outlook for autos and weakness in traditional industrial demand. consistent with the discussion. This expectation is further supported by data from InvestingPro, which shows trailing 12-month revenue growth as of Q2 2024 at -6.63%.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips on ON Semiconductor, providing a broader perspective on the company’s financial health and market position.
This article was generated with the help of AI and reviewed by an editor. Please see our Terms of Use for more information.
