Company Reports

We lower our fair value estimate for shares of narrow-moat Onsemi to $86, from $94, as we trim our short-term forecast to reflect a higher impact from the ongoing power chip downturn. We continue to like Onsemi’s ability to navigate the current period of weaker demand, especially on the profitability front. We also see softer demand as a short-term dynamic, resulting from overordering at customers in 2023, and we maintain our confidence in Onsemi’s long-term growth opportunity in electric vehicles and renewable energy. Nonetheless, we now model a greater decline in sales in 2024 after second-quarter guidance missed our expectations. We continue to model a rebound in 2025. We still see shares as undervalued and see cyclical weakness as a buying opportunity for long-term investors.

We believe Onsemi is a power chipmaker aligning itself to the differentiated parts of its portfolio in order to accelerate growth and margin expansion. We expect Onsemi to outpace the growth of its underlying markets over the next five years as it tailors its portfolio of chips and sensors to pursue secular trends toward electrification and connectivity that allow it to sell into new sockets. Specifically, Onsemi is the top supplier of image sensors to automotive applications like advanced driver-assist systems, or ADAS, and its semiconductors enable power management and conversion in electric vehicles, or EVs, and renewable energy—all of which we expect to keep Onsemi’s sales growth above that of the broader semiconductor industry.

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.

We believe Onsemi is a power chipmaker aligning itself to the differentiated parts of its portfolio in order to accelerate growth and margin expansion. We expect Onsemi to outpace the growth of its underlying markets over the next five years as it tailors its portfolio of chips and sensors to pursue secular trends toward electrification and connectivity that allow it to sell into new sockets. Specifically, Onsemi is the top supplier of image sensors to automotive applications like advanced driver-assist systems, or ADAS, and its semiconductors enable power management and conversion in electric vehicles, or EVs, and renewable energy—all of which we expect to keep Onsemi’s sales growth above that of the broader semiconductor industry.

We trim our fair value estimate for shares of narrow-moat Onsemi to $94, from $97, after it reported solid third-quarter results, but its guidance missed our expectations. Onsemi is expecting lower silicon carbide, or SiC, revenue in the remainder of 2023, behind a large order pushout in its automotive business. The firm is also absorbing manufacturing underutilization costs that weigh on margins as it adjusts for lower overall chip demand this year. Despite short-term headwinds, we are confident in Onsemi's long-term focus on electrification in automotive and industrial applications. We see the firm as primed for strong growth and margin expansion after this period of weaker demand. Shares dropped as much as 19% on the weaker outlook, leaving it undervalued in our view. We think the level of selloff for the stock well overshadows the level by which Onsemi's guidance missed our expectations.

We think Onsemi is a power chipmaker aligning itself to the differentiated parts of its portfolio in order to accelerate growth and margin expansion. We expect Onsemi to outpace the growth of its underlying markets over the next five years as it tailors its portfolio of chips and sensors to pursue secular trends toward electrification and connectivity that allow it to sell into new sockets. Specifically, Onsemi is the top supplier of image sensors to automotive applications like advanced driver-assist systems, or ADAS, and its semiconductors enable power management and conversion in electric vehicles, or EVs, and renewable energy—all of which we expect to keep Onsemi’s sales growth above that of the broader semiconductor industry.

We maintain our $97 per share fair value estimate for narrow-moat Onsemi after the firm reported second-quarter results and third-quarter guidance modestly above our expectations. The firm is executing well on its strategy to expand its foothold in the automotive and industrial markets, and we are pleased with its progress ramping silicon carbide, or SiC, power semiconductors. Despite numerous headwinds affecting near-term profitability, we view this as transitory, as Onsemi positions itself to secure long-term sustainable growth. With shares trading around $108, we view the stock as slightly overvalued.

We raise our fair value estimate for Onsemi to $97 per share, from $74, after a confident analyst day that we believe has substance. Onsemi raised its long-term financial targets across the board, well above our expectations. Its targets are ambitious, but the management team has earned our confidence in achieving them, especially on the profitability front, given the firm's impressive transformation since 2020. We believe Onsemi has positioned itself to profit off of fast-growing secular trends and reduce cyclicality. Achieving its new targets will require defending myriad threats in silicon carbide and image sensing, as well as flawless execution on manufacturing efficiency. More than $17 billion cumulatively in long-term agreements give us confidence in management’s visibility. At our updated valuation, we see shares as attractive. The stock reaction to the event was uninspiring, which we believe is due to both skepticism on target achievement as well as already-high estimates and price targets.

We think Onsemi is a power chipmaker aligning itself to the differentiated parts of its portfolio in order to accelerate growth and margin expansion. We expect Onsemi to outpace the growth of its underlying markets over the next five years as it tailors its portfolio of chips and sensors to pursue secular trends toward electrification and connectivity that allow it to sell into new sockets. Specifically, Onsemi is the top supplier of image sensors to automotive applications like advanced driver-assist systems, or ADAS, and its semiconductors enable power management and conversion in electric vehicles, or EVs, and renewable energy—all of which we expect to keep Onsemi’s sales growth above that of the broader semiconductor industry.

We maintain our $74 per share fair value estimate for narrow-moat Onsemi after it reported first-quarter results and second-quarter guidance lightly above our expectations. The firm's focus on the automotive and industrial markets continues to generate strong results, and we remain impressed by its progress ramping silicon carbide, or SiC. Onsemi is fending off several headwinds to profitability, but we think its margins are holding up quite well. Overall, we see 2023 as a transitory year with some pockets of weakness, but view Onsemi as strongly positioned for long-term profitable growth. We see shares as fairly valued.

We maintain our $74 fair value estimate for narrow-moat Onsemi after the firm reported good fourth-quarter results in line with our expectations. Onsemi is capping off two tremendous years that showed more than 20% annual top-line growth and 1,650 basis points of non-GAAP gross margin expansion that we view as durable. The firm is bracing for softer results in 2023 as it navigates a cyclical chip downturn and production headwinds to margin, but we believe Onsemi is better positioned to navigate soft end markets with a focused portfolio of differentiated chips. We remain confident in the firm’s ability to continue growing its presence in the automotive and industrial markets with both silicon and silicon carbide (SiC). We are positive on Onsemi's fundamentals but see shares as a bit rich currently.

We think Onsemi is a power chipmaker aligning itself to the differentiated parts of its portfolio in order to accelerate growth and margin expansion. We expect Onsemi to outpace the growth of its underlying markets over the next five years as it tailors its portfolio of chips and sensors to pursue secular trends toward electrification and connectivity that allow it to sell into new sockets. Specifically, Onsemi is the top supplier of image sensors to automotive applications like advanced driver-assist systems, or ADAS, and its semiconductors enable power management and conversion in electric vehicles, or EVs, and renewable energy--all of which we expect to keep Onsemi’s sales growth above that of the broader semiconductor industry.

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.

We think Onsemi is a power chipmaker aligning itself to the differentiated parts of its portfolio in order to accelerate growth and margin expansion. We expect Onsemi to outpace the growth of its underlying markets over the next five years as it tailors its portfolio of transistors, analog chips, and sensors to pursue secular trends toward electrification and connectivity that allow it to sell into new sockets. Specifically, Onsemi is the top supplier of image sensors to automotive applications like advanced driver-assist systems, or ADAS, and its semiconductors enable power management and conversion in electric vehicles, or EVs, and renewable energy--all of which we expect to keep Onsemi’s sales growth above that of the broader semiconductor industry.

We think Onsemi is a power chipmaker aligning itself to the differentiated parts of its portfolio in order to accelerate growth and margin expansion. We expect Onsemi to outpace the growth of its underlying markets over the next five years as it tailors its portfolio of transistors, analog chips, and sensors to pursue secular trends toward electrification and connectivity that allow it to sell into new sockets. Specifically, Onsemi is the top supplier of image sensors to automotive applications like advanced driver-assist systems, or ADAS, and its semiconductors enable power management and conversion in electric vehicles, or EVs, and renewable energy--all of which we expect to keep Onsemi’s sales growth above that of the broader semiconductor industry.

We’re raising our fair value estimate for narrow-moat Onsemi to $74 per share, from $67 previously, following a strong second quarter and bullish outlook. We’re impressed with Onsemi raising its already-robust silicon carbide, or SiC, targets for the next couple years, which we think will be a key growth driver and differentiator in both the automotive and industrial markets. Shares dipped modestly after the print, likely due to worries about weakness in Onsemi's non-core markets and margin headwinds. We are more confident, and also expect Onsemi would fare relatively well in a potential near-term chip downcycle. Onsemi increasingly benefits from secular trends like those toward electric and autonomous vehicles and we believe a greater mix of differentiated chips should reduce margin cyclicality. We continue to expect the firm to hit management's ambitious 2025 targets, and note it is already in its target profitability ranges. We view shares as modestly undervalued.

Onsemi’s strong first-quarter results reaffirmed our confidence in management’s long-term vision for realigning the company toward stronger growth and profitability. We maintain our $67 per share fair value estimate and think shares look like a bargain for this narrow-moat company. We think the firm’s focus on differentiated solutions for electric vehicles, autonomous vehicles, and renewable energy infrastructure is being rewarded on the top and bottom lines. We continue to be impressed with management’s ability to extract higher profits from Onsemi, and we also think investment in silicon carbide, while already reaping results, will pave long-term growth.

We think Onsemi is a power chipmaker aligning itself to the differentiated parts of its portfolio in order to accelerate growth and margin expansion. We expect Onsemi to outpace the growth of its underlying markets over the next five years as it tailors its portfolio of transistors, analog chips, and sensors to pursue secular trends toward electrification and connectivity that allow it to sell into new sockets. Specifically, Onsemi is the top supplier of image sensors to automotive applications like advanced driver-assist systems, or ADAS, and its semiconductors enable power management and conversion in electric vehicles, or EVs, and renewable energy--all of which we expect to keep Onsemi’s sales growth above that of the broader semiconductor industry.

We think onsemi is a power chipmaker aligning itself to the differentiated parts of its portfolio in order to accelerate growth and margin expansion. We expect Onsemi to outpace the growth of its underlying markets over the next five years as it tailors its portfolio of transistors, analog chips, and sensors to pursue secular trends toward electrification and connectivity that allow it to sell into new sockets. Specifically, Onsemi is the top supplier of image sensors to automotive applications like advanced driver-assist systems, or ADAS, and its semiconductors enable power management and conversion in electric vehicles, or EVs, and renewable energy--all of which we expect to keep Onsemi’s sales growth above that of the broader semiconductor industry.

We’re raising our fair value estimate for narrow-moat onsemi to $67 per share, from $48, following a strong fourth quarter and significantly stronger long-term guidance than our prior expectations. We think onsemi is successfully executing its strategy to align its portfolio to high-value megatrends in the industrial and automotive markets, resulting in a big hike in management’s long-term gross margin target to 48%-50%, from 43%-45% previously. While we believe onsemi is capitalizing on a favorable short-term supply environment, we are confident its re-alignment will help reduce its vulnerability to cyclicality going forward. We have previously been skeptical of management’s lofty targets and continue anticipating weaker performance in a downcycle than management would admit. Nevertheless, we believe onsemi’s fundamentals are strong and now expect the firm to ramp up to hit management’s 2025 financial goals. The market responded positively to the results and guidance, and we now view shares as fairly valued.