Onsemi Earnings: Results Bouncing Along Cyclical Bottom, but We See Positive Catalyst in 2025

We maintain our $86 fair value estimate for shares of narrow-moat Onsemi after third-quarter results and fourth-quarter guidance fit with our longer-term expectations. Onsemi has been hampered by cyclically weak automotive and industrial chip demand in 2024 and customers working down their own inventories. We believe the current softness is short-term in nature, and we expect a return to growth in 2025. Long term, we remain bullish on Onsemi's growth prospects as electrical architectures grow more complex in high-voltage applications like electric vehicles. We also like that the firm has structurally improved its margin profile, even during a downturn. We see shares as undervalued, and we believe investors should look to returning growth in 2025 as a positive catalyst.