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Tuesday, ON Semiconductor shares are in focus after Rosenblatt Securities adjusted its outlook on the company. Analysts at the firm lowered the price target for ON Semiconductor (NASDAQ:ON) to $49 from the previous $75 while maintaining a Neutral rating on the stock. The stock, currently trading near its 52-week low of $46.57, has declined 34% over the past six months. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations. This revision follows ON Semiconductor’s recent earnings report, which fell short of expectations for the December quarter.
The company’s performance was impacted by a range of uncertainties, including geopolitical issues and fluctuating end-user demand. Consequently, management’s guidance indicates a 20% quarter-over-quarter decrease, a steeper decline than the 5% anticipated by consensus. InvestingPro data shows revenue is expected to decline by 14% this year, though the company maintains strong financial health with a robust current ratio of 3.07. Additionally, manufacturing utilization has dwindled to 59%, prompting the company to consider further manufacturing and structural rationalizations.
Despite the challenges, ON Semiconductor has shown some promising developments. The firm’s Treo Platform, gains in data center power, and advancements in 200mm silicon carbide (SiC) technology were highlighted as positive factors. However, these are currently overshadowed by weaker demand in the Automotive and Industrial sectors, which are significant markets for the company’s products.
The analyst from Rosenblatt expressed a cautious stance, stating, "We remain on the sideline with lower estimates and lowering 12-month target price to $49." This sentiment reflects the current uncertainties and the subdued outlook for ON Semiconductor’s near-term performance. The company’s next steps and potential market responses remain to be seen as it navigates through these industry challenges.
In other recent news, ON Semiconductor has seen a series of price target adjustments from multiple financial firms. Morgan Stanley (NYSE:MS) lowered its target to $44, citing challenges that could impact revenue and gross margins. Despite improvements under CEO Hassane El-Khoury, concerns about the sustainability of these changes have influenced the valuation multiple applied to the company.
Needham also reduced its target for ON Semiconductor to $57, maintaining a buy rating. This adjustment follows the company’s forecast for a significant decrease in revenue for the first quarter of 2025, primarily due to demand weakness and inventory issues. Additionally, the company plans to shift away from price-sensitive markets with an estimated $400 million in non-core business exits throughout 2025.
Mizuho (NYSE:MFG) Securities reduced its price target from $85 to $71, while retaining an Outperform rating. The adjustment follows weaker than expected results for the December quarter and a downbeat forecast for the March quarter. Despite near-term obstacles, Mizuho believes the company’s long-term strategy remains on track.
Evercore ISI also adjusted the stock’s price target down to $75, maintaining an Outperform rating. The firm maintains a positive view on the risk-reward ratio for ON Semiconductor at its current valuation, endorsing the stock as a buying opportunity. They anticipate the March 2025 quarter will represent the lowest point for ON’s revenue and year-over-year growth.
Lastly, Citi analyst Christopher Danely adjusted the price target for ON Semiconductor shares to $52, maintaining a Neutral rating. The reassessment comes in the wake of disappointing financial results and a forecast for the first quarter of 2025 that falls short of market expectations.
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