Tuesday, Truist Securities increased its price target on shares of ON Semiconductor (NASDAQ:ON) to $97.00, up from the previous $97.00, while reiterating a Buy rating on the stock. This adjustment follows ON Semiconductor's second-quarter results, third-quarter guidance, and management commentary, which surpassed market apprehensions.
The semiconductor company reported a robust second quarter, with upcoming guidance and executive insights signaling a positive outlook. Truist Securities highlighted the company's effective control over product development, design win acquisition, and cost management, contributing to its financial performance.
According to the firm, ON Semiconductor is benefiting from strategic portfolio adjustments that are enhancing revenue and profit growth. Additionally, changes to its manufacturing footprint are expected to further increase profitability. The company is also recognized for maintaining its leadership in Silicon Carbide (SiC) technologies at a time when investor confidence in the SiC narrative seemed to wane.
The revised price target is based on a 20 times multiple of the estimated earnings per share (EPS) for the calendar year 2025, which the analyst now sets at $4.83, adjusted from the previous estimate of $5.17. This valuation multiple continues to be traditionally two times lower than that of its peers, reflecting a conservative yet optimistic perspective on the stock's future performance.
In other recent news, ON Semiconductor has been making noteworthy strides. The company exceeded its Q2 2024 guidance for revenue, non-GAAP gross margin, and non-GAAP earnings per share, with revenues reaching $1.74 billion. This comes amid a stabilization in core market demand and improvements in inventory management.
TD Cowen recently demonstrated confidence in ON Semiconductor by raising the company's price target from $85.00 to $90.00, maintaining a buy rating. The firm's decision was based on ON Semiconductor's conservative approach and strategic internal initiatives, despite uneven results from industry peers and broad market sentiment.
In addition, Baird raised ON Semiconductor's price target to $70, citing positive trends such as continued market share gains in Silicon Carbide and the introduction of new, higher-margin analog products. However, Baird maintained a neutral rating, acknowledging industry-wide risks such as inventory levels and pricing pressures.
ON Semiconductor has also been expanding its portfolio. The company acquired SWIR Vision Systems to enhance its industrial and defense offerings and was named the primary supplier for Volkswagen (ETR:VOWG_p) Group's next-generation traction inverter. Looking forward, ON Semiconductor projects Q3 revenue to range between $1.7 billion and $1.8 billion, with non-GAAP earnings per share expected to be between $0.91 and $1.03.
InvestingPro Insights
ON Semiconductor's recent performance and future prospects have been a subject of much discussion, and the latest insights from InvestingPro provide additional context. With a market capitalization of $33.53 billion, the company trades at a P/E ratio of 17.77, which may be considered high relative to near-term earnings growth. Despite analysts anticipating a sales decline in the current year, the company's gross profit margin remains strong at 46.3%, showcasing its ability to maintain profitability amid revenue fluctuations.
InvestingPro Tips reveal that while net income is expected to drop this year, ON Semiconductor's cash flows can sufficiently cover interest payments, and its liquid assets exceed short-term obligations. These factors indicate a stable financial position, allowing the company to navigate potential market challenges. Additionally, the company does not pay a dividend, which suggests that it may be reinvesting earnings back into the business to fuel growth.
For investors looking for more comprehensive analysis, there are additional InvestingPro Tips available, which can be accessed with a subscription. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. These insights could provide further clarity on ON Semiconductor's performance and potential, helping investors make more informed decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.