Baird cuts ON Semiconductor price target to $48 from $75

On Tuesday, Baird analyst Tristan Gerra revised the price target for ON Semiconductor (NASDAQ:ON), reducing it significantly to $48.00 from the previous $75.00, while maintaining a Neutral rating on the stock. Gerra noted that the company’s utilization rate has dropped to a mid-50s percentage, which he identified as a historically low level. The stock, currently trading near $47, has declined over 34% in the past six months and is trading close to its 52-week low of $46.57. According to InvestingPro data, the company maintains a "GOOD" overall financial health score despite recent challenges.

Gerra’s report highlighted that ON Semiconductor is poised for a secular increase in gross margin that should become apparent when the market recovers. The company currently maintains a healthy gross profit margin of 45.8% and generates strong returns with a 22% return on equity. However, this potential is offset by current challenges, including a sacrifice in near-term growth and market share. According to the analyst, ON Semiconductor has been undershipping to end-demand compared to its peers, which may adopt a more opportunistic approach during this period.

The management of ON Semiconductor has acknowledged these challenges and is planning to implement several cost-saving measures. These measures include further rationalization of the manufacturing footprint and product portfolio, headcount reductions, and the potential closure of sites. These steps are part of the company’s strategy to navigate through the current market conditions. For a deeper understanding of ON Semiconductor’s financial position and growth prospects, InvestingPro subscribers can access comprehensive analysis including 14+ additional ProTips and detailed financial metrics.

Gerra’s commentary on the company’s strategy was clear: "ON is well positioned for a secular increase in gross margin which will be evident once recovery takes place, at the expense of near-term growth and market share (undershipping end-demand), in the face of peer companies that will likely take a more opportunistic stance."

The Neutral rating indicates that Baird does not see significant movement in either direction for ON Semiconductor’s stock in the immediate future, suggesting that investors may expect the stock to perform in line with market or sector averages.

In other recent news, ON Semiconductor has been the subject of multiple analyst revisions. Stifel maintained a Hold rating on the company but reduced the price target from $60 to $52, citing near-term challenges related to macroeconomic conditions. Loop Capital Markets also adjusted its price target for ON Semiconductor, lowering it from $95 to $75, while maintaining a Buy rating. The firm noted cyclical challenges in the automotive and industrial sectors as reasons for the revised forecast.

Rosenblatt Securities lowered its price target for ON Semiconductor to $49 from $75, maintaining a Neutral rating, following the company’s recent earnings report. The firm pointed to geopolitical issues and fluctuating end-user demand as impacting the company’s performance. Morgan Stanley (NYSE:MS), citing challenges across ON Semiconductor’s product portfolio, reduced its price target from $52 to $44, maintaining an Underweight rating on the company’s shares.

Finally, Needham set a new price target for ON Semiconductor at $57, down from $66, but sustained a Buy rating. The adjustment followed the company’s forecast for the first quarter of 2025, which was significantly lower than market expectations. These are recent developments and investors are advised to monitor the situation closely.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.