Onsemi Earnings: Long-Term Growth Thesis Intact Despite Soft 2024, and Shares Remain Undervalued

We maintain our $94 fair value estimate for shares of narrow-moat Onsemi as we trim our 2024 sales forecast but maintain our long-term growth thesis. Onsemi’s fourth-quarter results met our expectations, but first-quarter guidance came in below our model. 2024 looks set to be a year of soft demand across both the automotive and industrial end markets, which should weigh on the firm’s performance in the short term. Nevertheless, we appreciate Onsemi’s strong profitability, even in a downturn, and continue to forecast strong growth over the next five years as the firm benefits from trends toward electrification and rising content in cars. Shares rose as much as 9% intraday after Onsemi reported results, likely due to a more modest decline in first-quarter guidance than the market feared. We continue to see further upside for long-term investors.