ON Semiconductor's Value Growth Potential Amid Challenges

ON Semiconductor faces challenges in 2024 but remains a compelling buy. Despite a 24.5% decline, its long-term prospects in automotive and industrial sectors offer a bright outlook for investors.

Date: 05-01-2025

AI Rating: 6

Market Reaction and Valuation: ON Semiconductor's stock has seen a significant drop of 24.5% last year, which might reflect an overreaction to its current challenges. Despite this, the report suggests that its valuation appears attractive, trading at 15.7 times the expected earnings per share (EPS) of $4 in 2024. For 2025, estimated EPS is $4.29, leading to an even lower valuation multiple of 14.6. This indicates that the stock price may be undervalued with respect to its future earnings potential.

Earnings Per Share (EPS): The projections show ON Semiconductor is expected to achieve earnings of $4 in 2024, with a slight increase to $4.29 in 2025. The report emphasizes that these are modest expectations and highlights the importance of patience as the semiconductor market is cyclical.

Revenue Growth: Revenue growth expectations for 2025 stand at a modest 4.2%. The cautious outlook reflects the prevailing economic conditions and challenges in end markets. The CEO's comments indicate uncertainty in demand, adding a layer of risk to revenue forecasts.

Market Conditions and Future Outlook: The report outlines challenges in both the automotive and industrial sectors. High interest rates remain a significant barrier to vehicle sales, particularly impacting the demand for electric vehicles (EVs), which are a key market for ON Semiconductor's products. The report does mention the company's long-term growth potential driven by advancements in automation and electric vehicles, asserting that investment in smart technologies will ensure future growth despite current market constraints. Therefore, while ON Semiconductor is currently facing headwinds, the long-term prospects remain positive, particularly as recovery in demand could lead to substantial upside for investors willing to wait.

Stocks: ON