On Tuesday, Needham reiterated its Buy rating on ON Semiconductor (NASDAQ:ON) shares with a maintained price target of $87.00. The endorsement comes as the company unveils its Treo Platform at Electronica, a novel addition to the high performance analog (HPA) segment.
The platform differentiates itself with a 65nm Bipolar-CMOS DMOS (BCD) process technology, capable of a broad operating voltage range of 1V-90V, and advanced digital integration. Produced on 300mm wafers at EFK, Treo is poised to serve key industries such as automotive, industrial, healthcare, and AI data centers.
ON Semiconductor has made significant strides with the Treo Platform, having already sampled 10 Stock Keeping Units (SKUs) and anticipating the doubling of this figure by mid-2025. The company expects to commence generating revenue from this innovation in the first half of 2025. Moreover, management has ambitious financial goals for Treo, aiming for a $1 billion revenue mark by 2030 and projecting gross margins as high as 70%.
The introduction of the Treo Platform is seen as a strategic move to tap into a substantial Total (EPA:TTEF) Addressable Market (TAM), estimated at $36 billion by ON Semiconductor. While Needham has not modified its current estimates, the firm anticipates that the Treo Platform could contribute to ON Semiconductor's financial performance in the forthcoming years, potentially leading to upside beyond current projections.
The company's outlook is optimistic, with the expectation that initial revenue from Treo will start flowing in the first half of 2025. This long-term vision is supported by a set revenue target of $1 billion by 2030, a testament to the company's confidence in the Treo Platform's market potential and profitability.
In other recent news, ON Semiconductor has been the focus of several analyst actions. Loop Capital initiated coverage on the company, assigning a Buy rating with a target price of $95, highlighting the company's strong position in the automotive market. The firm also noted the company's attractive valuation with a low price-to-earnings ratio of 17.0 times, based on next twelve months' earnings projections.
In their third-quarter earnings report, ON Semiconductor reported a slight increase in earnings, with revenue rising to $1.76 billion, marking a 2% sequential growth. For the fourth quarter, the company anticipates revenue to fall between $1.71 billion and $1.81 billion. Despite expectations of flat revenue, an increase in automotive sales in the low to mid-single digits is forecasted.
Deutsche Bank (ETR:DBKGn) maintained a Buy rating on ON Semiconductor, setting a price target of $90, following the company's announcement of the new Treo Platform. This platform is aimed at enhancing power management, sensor interfaces, and communications solutions. Meanwhile, Baird raised ON Semiconductor's price target to $75, expressing caution about the recovery pace and high inventories.
Benchmark upheld its Buy rating with a $90 target, highlighting opportunities in the datacenter market. Goldman Sachs raised the stock's price target to $92, citing strength in the China electric vehicle market and sustained industrial demand.
However, B.Riley reduced its price target from $106 to $100 due to weaker automotive industry unit sales, while Truist Securities lowered its price target to $89. These are among the recent developments for ON Semiconductor.
InvestingPro Insights
ON Semiconductor's Treo Platform launch aligns with its position as a prominent player in the Semiconductors & Semiconductor Equipment industry, as highlighted by InvestingPro Tips. The company's innovative approach with Treo could help offset the anticipated sales decline in the current year, another insight provided by InvestingPro.
Recent financial data from InvestingPro shows ON Semiconductor's market capitalization at $28.31 billion, with a P/E ratio of 16.14. The company's revenue for the last twelve months as of Q3 2024 stood at $7.38 billion, with a gross profit margin of 45.8%. These figures underscore the company's significant market presence and profitability, which could be further bolstered by the Treo Platform's projected high gross margins of up to 70%.
While the stock has experienced a 20.41% price decline year-to-date, the company's strong financials and innovative product launches like Treo suggest potential for future growth. InvestingPro Tips indicate that ON Semiconductor operates with a moderate level of debt and has liquid assets exceeding short-term obligations, positioning it well for investments in new technologies like the Treo Platform.
For investors seeking a deeper understanding of ON Semiconductor's prospects, InvestingPro offers 12 additional tips, providing a comprehensive analysis of the company's financial health and market position.
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