What Happened: Shares of analog chips maker ON Semiconductor (NASDAQ:ON) fell 6.59% in the pre-market session after the company reported third quarter results, with revenue and EPS guidance for the next quarter coming below Wall Street's expectations, amid "market softness." Gross and operating margins declined year on year while inventory levels rose slightly. It is worth mentioning that ON Semiconductor guided for near-term headwinds to margins at the beginning of the year (FY 2023) due to the expansion of its silicon carbide operation and its East Fishkill fab. This cautious guidance implies that the market may be uncertain about the duration of these challenges, although management emphasized their ongoing efforts to enhance efficiency, especially in the silicon carbide division.
On the other hand, revenue and earnings per share exceeded analysts' expectations during the quarter. Overall, the results were mixed, with the guidance likely a cause for concern.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy ON Semiconductor? Find out by reading the original article on StockStory.
What is the market telling us: ON Semiconductor's shares are quite volatile and over the last year have had 14 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was six months ago, when the stock gained 6.18% on the news that the company reported first-quarter results that surpassed analysts' expectations for revenue and earnings-per-share (EPS) although free cash flow (FCF) missed. Revenue growth was flattish, and gross margin was roughly in line. Guidance for next quarter's revenue, gross margin, and EPS were ahead of Consensus. It was a mixed but overall good quarter for the company.
ON Semiconductor is up 11.4% since the beginning of the year, but at $68.60 per share it is still trading 36.5% below its 52-week high of $108.09 from July 2023. Investors who bought $1,000 worth of ON Semiconductor's shares 5 years ago would now be looking at an investment worth $4,070.
