D-Wave Quantum falls nearly 3% as earnings miss overshadows revenue beat
Investing.com - TD Cowen has reduced its price target on ON Semiconductor (NASDAQ:ON) to $55.00 from $68.00 while maintaining a Buy rating on the stock. The stock, which has declined nearly 18% in the past week, currently trades at a P/E ratio of 43.25, according to InvestingPro data.
The firm cited company-specific headwinds despite ON Semiconductor delivering a modest beat and raise that fell short of market expectations. TD Cowen highlighted concerns about additional business exits planned for 2026 and stagnant gross margins, which InvestingPro data shows currently stand at 37.89%. The company maintains strong financial health with a current ratio of 5.02, indicating robust liquidity.
While demand has stabilized, which represents an improvement, the research firm noted that ON Semiconductor appeared "comparatively less optimistic" than peers, suggesting that a recovery isn’t imminent in the semiconductor space.
TD Cowen identified the disclosure of non-repeat revenues in 2026, representing approximately 5% of the company’s current total business, as a significant concern. The modest expansion of de-emphasized commodity business segments was also mentioned as a potential issue for investors.
The firm acknowledged that ON Semiconductor’s low expectations for estimates and its commitment to share buybacks at 100% of free cash flow could provide some support for the stock, though it emphasized that trust "needs to be rebuilt" with investors. The company’s aggressive share buyback strategy is supported by its healthy free cash flow yield of 7% and moderate debt levels, as revealed by InvestingPro data.
In other recent news, ON Semiconductor reported second-quarter revenue of $1.47 billion, marking a 1.6% increase quarter-over-quarter but a 15.4% decrease year-over-year. This revenue figure surpassed Stifel’s estimate of $1.45 billion by 1.3%. Despite the revenue beat, analysts have expressed concerns about the company’s recovery outlook. BofA Securities downgraded ON Semiconductor from Buy to Neutral, citing weak recovery prospects and challenges in the U.S. and European automotive markets. UBS also maintained a Neutral rating while lowering its price target to $50, pointing to revenue and margin headwinds expected in 2026. On a more positive note, Needham raised its price target to $58, highlighting solid results and guidance that exceeded expectations. Meanwhile, Mizuho (NYSE:MFG) adjusted its price target to $68 due to concerns over soft margins, although it maintained an Outperform rating. Stifel reiterated a Hold rating with a $50 price target, noting "continued signs of early stabilization."
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