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ON Semiconductor Corp ON

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Morningstar’s Analysis

Valuation
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

ON Semiconductor Posts a Strong Quarter; Guides for a Rebound; Maintain $30 FVE; Shares Overvalued

Brian Colello, CPA Sector Director

Analyst Note

| Brian Colello, CPA |

Narrow-moat ON Semi kicked off 2021 with the top line marginally exceeding our expectations and falling within management’s prior guidance range. With broad-based growth within this quarter and strong guidance for the upcoming one, ON Semi is benefiting from an economic rebound after a challenging 2020. Management reiterated its ambitions to expand margins by committing to making further structural changes to the business. We are maintaining our $30 fair value estimate for the company. With shares trading around $39, we recommend investors wait for a pullback before committing new capital to the name.

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Company Profile

Business Description

ON Semiconductor spun off from Motorola in 1999 and has since become a leading supplier of chips into automotive and industrial markets, with products in analog, discrete, power management, and image sensing. The firm has made several acquisitions in the past few years to solidify share in its key markets. The largest of these was the 2016 purchase of Fairchild Semiconductor for $2.4 billion, which greatly increased the firm’s strength in the discrete chip market.

Contact
5005 East McDowell Road
Phoenix, AZ, 85008
T +1 602 244-6600
Sector Technology
Industry Semiconductors
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 34,500

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