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On Tuesday, Truist Securities adjusted its outlook on ON Semiconductor (NASDAQ:ON), reducing the price target from $52.00 to $43.00 while maintaining a Hold rating on the stock. The stock has declined nearly 47% over the past six months, with the current price around $38.42. The revision reflects concerns over tariff uncertainty, which appears to overshadow signs of cyclical stabilization within the company’s industrial markets. According to InvestingPro, 13 analysts have recently revised their earnings estimates upward for the upcoming period, suggesting mixed sentiment in the market.
In the recent financial results, ON Semiconductor reported earnings that surpassed expectations for both revenue and earnings per share in the first quarter, as well as for the second quarter guidance. The company maintains strong financial health, with InvestingPro data showing a healthy current ratio of 4.95 and moderate debt levels. However, the Truist Securities analyst pointed out that the positive results stemmed from the "other" end market, which is considered less strategic, while the more critical automotive end market did not meet expectations.
The analyst also noted that the booking strength ON Semiconductor experienced in the first quarter had weakened at the start of the second quarter following the announcement of tariffs. This development suggests that while there may be a cyclical stabilization happening in the company’s industrial end markets, it is currently being overshadowed by concerns related to tariffs.
Moreover, the analyst has adjusted the projected earnings per share for the calendar year 2026 to $3.27, down from the previous estimate of $3.47. The new price target of $43.00 is based on a 13 times multiple, which reflects a continued 10% discount to the multiples of recently-lower multiple peers within the industry.
ON Semiconductor’s financial performance, particularly in the less strategic market segments, and the updated earnings forecast, have led Truist Securities to reaffirm its Hold rating on the stock, albeit with a reduced price target reflecting the heightened tariff concerns. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of this prominent semiconductor player.
In other recent news, ON Semiconductor reported its Q1 2025 earnings, exceeding Wall Street expectations with an earnings per share (EPS) of $0.55 compared to a forecast of $0.52, and revenue reaching $1.45 billion against the anticipated $1.41 billion. Despite these favorable results, the company’s stock experienced a notable decline. UBS has adjusted its stance on ON Semiconductor by increasing the price target from $40 to $45, maintaining a Neutral rating. This change comes as the company’s guidance for the June quarter slightly surpassed expectations, although challenges such as underutilization and pricing pressures remain. BofA Securities, meanwhile, reduced the price target from $48 to $46 while retaining a Buy rating, citing potential impacts on gross margins and operating expenses. The firm’s revised earnings estimates reflect a downward adjustment for fiscal years 2025 and 2026. ON Semiconductor is also focusing on cost reduction strategies and new Silicon Carbide projects with Chinese electric vehicle manufacturers, expected to ramp up in the latter half of 2025. The company plans to increase share buybacks to 100% of free cash flow in 2025, signaling confidence in its financial stability.
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