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On Tuesday, Evercore ISI issued an update on ON Semiconductor (NASDAQ:ON), adjusting the stock’s price target down to $75 from the previous $107, while still maintaining an Outperform rating. The revision comes amidst expectations of a revenue downturn for the company’s March 2025 quarter. Currently trading at $47.04, the stock has experienced significant pressure, down 34% over the past six months. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value assessment, with analyst targets ranging from $44 to $107.
The firm’s analysts noted that ON Semiconductor’s revenue outlook for the March 2025 quarter is projected to be 17% below the consensus, and 36% below its peak in the third quarter of 2023. This outlook also assumes a year-over-year decline of 25%. Despite this, ON Semiconductor’s shares are currently trading at a 26% discount to their 20-year relative P/E median to the S&P 500, which aligns with Evercore ISI’s analysis. The analysis suggests that after adjusting for average selling price (ASP) increases, the cumulative undershipment during the inventory correction phase is 28% less than the overshipment during the prior inventory build-up.
Evercore ISI believes that the analysis of undershipment and overshipment does not fully account for potential market share gains, especially as electric vehicles (EVs) become more prevalent. The analysts maintain a positive view on the risk-reward ratio for ON Semiconductor at its current valuation, endorsing the stock as a buying opportunity. They anticipate that the March 2025 quarter will represent the lowest point for ON’s revenue and year-over-year growth. Additionally, they expect the auto-supply chain to reduce inventories below normal levels, which could benefit ON Semiconductor as it may lead to a restocking cycle and potentially accelerated growth in the second half of 2025. With a P/E ratio of 14.12 and strong historical performance, including robust returns over the past decade, the company maintains solid fundamentals despite current market challenges. For comprehensive analysis of ON Semiconductor and 1,400+ other stocks, access the detailed Pro Research Report available on InvestingPro.
In other recent news, ON Semiconductor has been the focus of analysts at Citi and Jefferies. Citi adjusted the company’s stock target to $52, maintaining a neutral stance, following the disclosure of disappointing financial results and a forecast that fell short of market expectations. This was largely due to an inventory adjustment in the Chinese automotive sector, which is projected to cause a significant drop in ON Semiconductor’s automotive sales. In contrast, Jefferies reduced the company’s stock target from $100 to $85 but maintained a buy rating, citing the company’s proactive measures to streamline operations and prepare for a market recovery.
ON Semiconductor’s recent financial results also revealed a miss on both earnings and revenue expectations. The company reported fourth-quarter adjusted earnings per share of $0.95, missing the analyst consensus of $0.97, and revenue of $1.72 billion, which was below the expected $1.76 billion. Furthermore, the company’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 in the range of $1.35 billion to $1.45 billion.
Despite these developments, analysts from both Citi and Jefferies have incorporated these recent weaknesses into their estimates and outlooks for ON Semiconductor. This suggests that the company’s sales performance may be nearing a trough, while its restructuring efforts position it well for future gains once the business climate improves.
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