What’s sparking investor interest in ON Semiconductor (NASDAQ: ON)? It’s likely the EV connection. The chip manufacturer is one of the leaders in silicon carbide power chip technology, favored for electric vehicle (EV) use and chargers. The company’s stock price increased 11.5% following its Q2 results. Non-GAAP EPS was $0.96, and sales were $1.74 billion, both beating analyst estimates.

Despite the positive performance, Q2 revenue was down 17% year-over-year, and adjusted EPS fell 28%, though it still beat targets.

The company's third-quarter guidance contributed to bullish sentiment among investors. ON projects sales between $1.7 billion and $1.8 billion, with adjusted EPS between $0.91 and $1.03 and an adjusted gross margin of 44.4% to 46.4%. However, it should be noted that sales in last year’s quarter were $2.18 billion, EPS was $1.29, and the adjusted gross margin was 47.3%.

What's New?

Arizona-based ON Semiconductor Corporation (Onsemi) designs, manufactures, and distributes semiconductor products. Their more than 80,000 parts include silicon carbide technology (EliteSiC), MOSFETs, and image sensors. Onsemi serves tens of thousands of customers, providing power and sensor chips for the industrial and automotive markets. The company is focused on industrial automation, vehicle electrification, sustainable energy grids, and cloud and 5G infrastructure.

Recent company initiatives include a power solution to improve data centers’ energy efficiency and its 7^th Gen IGBT Modules to simplify design for renewable energy applications and lower costs. Most recently, Onsemi introduced its latest silicon carbine technology platform and signed a deal with Volkswagen to supply silicon carbide technologies for its next-generation traction inverter.

By The Numbers

Even with the recent increase, ON's stock price is still down 26% over the last year and 6% in 2024. Shares are currently valued at about 19.5 times this year's expected profits. While this valuation might seem high given recent declines in sales and earnings, some investors speculate that ON is poised to benefit from a cyclical upswing in the semiconductor industry.

What’s the mood on Wall Street? Based on 30 analysts' comments, the consensus rating is a Strong Buy, with an average price target of $86.83. ON is currently trading at $78.54.

Neither Julie Stoller nor Stocks.News has positions in this company.