Onsemi's Pivot Toward Value Progressing in Q3 Despite Pockets of Weakness; Maintain $74 FVE

We maintain our $74 fair value estimate for narrow-moat Onsemi after the firm reported strong third-quarter results and provided cautious guidance roughly in line with our expectations. We were pleased to see growth driven again by the automotive and industrial end markets, which are an increasing focus for Onsemi. As macroeconomic demand for semiconductors softens, Onsemi is seeing some weakness in noncore portions of its portfolio, but we continue to appreciate management’s pivot into stickier and more secular markets to dampen its cyclicality and structurally improve profitability. Shares dipped 5% in early trading, which we attribute mostly to broader macro concerns rather than Onsemi's performance. We see shares as modestly undervalued and believe Onsemi is in a position of relative strength to weather a downcycle.