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Investing.com - Benchmark raised its price target on ON Semiconductor (NASDAQ:ON) to $60.00 from $50.00 on Tuesday, while maintaining a Buy rating on the semiconductor company’s stock. The new target comes as the stock, currently trading at $47.70, has experienced a significant 17.8% decline over the past week. According to InvestingPro data, 10 analysts have recently revised their earnings estimates upward for the upcoming period.
The research firm cited ON Semiconductor’s in-line results and guidance, with ongoing stabilization across its end markets. The company’s revenue was approximately $17 million ahead of expectations, with earnings matching consensus estimates. The company, with a market capitalization of $19.6 billion, maintains strong liquidity with a current ratio of 5.02, indicating robust financial health.
Benchmark noted that the Power Solutions Group (PSG) segment was the standout performer in the quarter, improving 8% quarter-over-quarter, while the Intelligent Sensing Group (ISG) declined 8.4% and the Advanced Solutions Group (ASG) was down 2%.
Despite capacity rationalization in the second quarter, utilization remains a significant gross margin headwind, with third-quarter gross margin guided to be down 10 basis points to approximately 37.5% at the midpoint. About 900 basis points of this pressure is attributed to underutilization charges, with silicon carbide running below the corporate average margin profile.
Benchmark expects a sharp rebound in margins as volume returns, which should drive meaningful earnings per share leverage, supporting its decision to maintain a Buy rating while increasing the price target. InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which covers what really matters for investors in ON Semiconductor.
In other recent news, ON Semiconductor has reported its second-quarter earnings, which exceeded expectations, along with third-quarter guidance that surpassed Street consensus. However, the company’s forecast of slightly lower non-GAAP gross margins has raised some concerns. BofA Securities downgraded ON Semiconductor from Buy to Neutral, reducing its price target to $56, due to a weak recovery outlook and missed industrial sales targets. Meanwhile, Rosenblatt also lowered its price target to $50, maintaining a Neutral rating, citing the same earnings results. TD Cowen reduced its price target to $55, keeping a Buy rating, but highlighted concerns about stagnant gross margins and planned business exits. UBS echoed these sentiments, lowering its price target to $50 and maintaining a Neutral stance, pointing out increased revenue and gross margin headwinds. Conversely, Needham raised its price target to $58 and maintained a Buy rating, noting the company’s solid results and guidance that exceeded expectations. These developments reflect a mix of optimism and caution among analysts regarding ON Semiconductor’s future performance.
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