On Tuesday, Benchmark, a financial analysis firm, upheld its Buy rating and $90.00 stock price target for ON Semiconductor (NASDAQ:ON). The company's third-quarter earnings slightly exceeded expectations, although its guidance for the upcoming period was somewhat below the consensus. This was attributed to continued weak demand and inventory adjustments in the Automotive and Industrial sectors.
Sequentially, ON Semiconductor reported a revenue increase of 1.5%, driven by strength in Silicon Carbide (SiC) and a return to quarter-over-quarter growth in the Automotive sector due to new OEM platform launches. This growth was somewhat dampened by a 6% decrease in the Industrial segment.
Despite the overall sluggish demand, ON Semiconductor is gaining market share and expanding its product content, especially as new Electric Vehicle (EV) design wins begin production, predominantly in China.
The revenue outlook for ON Semiconductor aligns with expectations, considering the current muted demand and lack of market visibility. Nonetheless, SiC, a key product area for the company, is anticipated to grow in the low to mid-single digits this year despite an approximate 14% drop in total revenue. The company's confidence remains strong in its market position and the increasing penetration of SiC in both new and existing applications.
Benchmark also highlighted ON Semiconductor's promising opportunities in the datacenter market, with new products expected to drive content expansion opportunities, potentially increasing from $2,500 to over $9,000 per unit. These contributions are forecasted to start in early 2026.
Although the anticipated recovery in the second half of the year did not occur, the firm's optimism is sustained by the momentum of design wins and new product introductions, which are expected to lead to a significant rebound in 2026.
In other recent news, ON Semiconductor has seen significant developments. The company reported a slight revenue increase to $1.76 billion in its third-quarter earnings, marking a 2% sequential growth, with a projected revenue between $1.71 billion and $1.81 billion for the fourth quarter.
Despite the expectation of flat revenue, an increase in automotive sales in the low to mid-single digits is anticipated. Goldman Sachs raised the company's stock price target to $92.00, citing strength in the China electric vehicle market and sustained demand in certain industrial sectors.
Conversely, B.Riley reduced its price target from $106.00 to $100.00 due to weaker automotive industry unit sales, while Truist Securities lowered its price target to $89.00. Both firms maintained a Buy rating.
Analysts highlighted ON Semiconductor's operational efficiencies and potential in Advanced Driver-Assistance Systems (ADAS) as key factors in their assessments. These are among the recent developments for ON Semiconductor.
InvestingPro Insights
To complement Benchmark's analysis, InvestingPro data offers additional insights into ON Semiconductor's financial position. The company's market capitalization stands at $30.76 billion, reflecting its significant presence in the semiconductor industry. ON's P/E ratio of 17.66 suggests that investors are willing to pay a premium for its earnings, possibly due to its strong position in growth areas like Silicon Carbide and Electric Vehicle components.
InvestingPro Tips highlight that ON Semiconductor is a prominent player in the Semiconductors & Semiconductor Equipment industry, aligning with the article's focus on the company's market share gains and expanding product content. Moreover, the tip indicating that ON's stock price movements are quite volatile corroborates the market's reaction to the company's recent earnings and guidance.
It is worth noting that while analysts anticipate a sales decline in the current year, which is consistent with the reported 17.15% quarterly revenue decline, ON Semiconductor maintains a strong financial position. The company's ability to cover interest payments with its cash flows and its operation with a moderate level of debt suggest financial stability during this period of market adjustment.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips that could provide deeper insights into ON Semiconductor's market position and future prospects.
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