Citi cuts ON Semiconductor stock target to $52, maintains neutral

On Tuesday, Citi analyst Christopher Danely adjusted the price target for ON Semiconductor (NASDAQ:ON) shares, bringing it down to $52.00 from the previous target of $77.00. The stock, currently trading at $47.04, has fallen over 34% in the past six months and is hovering near its 52-week low of $46.57. Despite the significant reduction, the firm maintained a Neutral rating on the stock.

Yesterday, ON Semiconductor disclosed disappointing financial results and provided a forecast for the first quarter of 2025 that falls short of market expectations. The underwhelming guidance is primarily attributed to an inventory adjustment occurring within the Chinese automotive sector. As a result, ON Semiconductor’s automotive sales are projected to plummet by approximately 33% from their peak, a steeper decline than the average 20% drop experienced by its industry peers. Despite these challenges, InvestingPro data shows the company maintains strong fundamentals with a current ratio of 3.07 and operates with moderate debt levels.

The analyst pointed out that the combined sectors of Industrial and Automotive, which accounted for 81% of the company’s sales in calendar year 2024, are now believed to have their recent weaknesses reflected in current estimates. This suggests that ON Semiconductor may be approaching a low point in terms of sales performance.

The reassessment of ON Semiconductor’s price target and the reiteration of a Neutral rating come in the wake of these developments. Danely’s commentary underscored the anticipation that the company’s sales in key segments are nearing a trough, which has been factored into the new price target.

In other recent news, ON Semiconductor’s Q4 earnings missed analyst expectations, with adjusted earnings per share of $0.95, falling short of the anticipated $0.97. The company’s revenue was reported at $1.72 billion, below the expected $1.76 billion. Furthermore, the firm’s outlook for the first quarter of 2025 was significantly below Wall Street estimates, forecasting adjusted earnings per share between $0.45 and $0.55, and revenue expected between $1.35 billion and $1.45 billion.

In response to these developments, Jefferies adjusted its outlook on ON Semiconductor, reducing the stock’s price target from $100.00 to $85.00, while maintaining a Buy rating. The firm cited lower-than-expected guidance across all end markets and regions, leading to decreased utilization rates and an impact on gross margins.

Despite the disappointing results, Jefferies expressed approval of ON Semiconductor’s proactive measures to streamline operations. The firm believes that the company’s restructuring efforts, including operational expenses and fabrication capacity adjustments, are counterbalancing revenue and gross margin reductions.

Jefferies remains optimistic about the potential for significant upside in ON Semiconductor’s stock once the business climate improves. The firm believes that the company’s strategic actions during this challenging period position it well for future gains. These are recent developments in ON Semiconductor’s financial performance and strategic initiatives.

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