Onsemi (ON) soared in trading on Monday following robust results in the second quarter. The chip supplier reported adjusted earnings of $0.96 per share, compared to earnings of $1.33 per share in the same period last year. This was above analysts’ expectations of $0.92 per share.
The company posted revenues of $1.74 billion in the second quarter, a decline of 17.2% year-over-year, compared to consensus estimates of $1.73 billion.
ON CEO’s Comments
Last month, the company unveiled silicon carbide chips, which have two key applications. First, they are designed to make data centers more energy efficient by improving power conversion. Second, silicon carbide chips are used in electric vehicles to extend their driving range. Although silicon carbide is more expensive than standard silicon, its superior performance in both energy efficiency and range makes it a valuable technology.
Hassane El-Khoury, Onsemi’s President and CEO, commented, “As reflected by our recent supply agreement with Volkswagen Group, we also continue to strengthen our silicon carbide leadership position in automotive as we ramp production with leading global original equipment manufacturers (OEMs) in Europe, North America, and China.”
ON’s Third Quarter Outlook
After a prolonged period of weak demand for automotive semiconductors, carmakers are now clearing out excess chip inventories built during the pandemic. This is likely to benefit companies like Onsemi because, as carmakers deplete their old stockpiles, they will need to purchase new chips. Onsemi, with its advanced semiconductor technology, is well-positioned to supply these new orders, thus benefiting from the rebound in chip demand.
Looking ahead, onsemi has projected revenues in the range of $1.7 billion to $1.8 billion, with adjusted earnings between $0.91 and $1.03 per share. For reference, analysts were expecting $1.78 billion in revenue.
Is ON Semiconductor a Buy or Sell?
Analysts remain cautiously optimistic about ON stock, with a Moderate Buy consensus rating based on 11 Buys, six Holds, and one Sell. Over the past year, ON has declined by more than 20%, and the average ON price target of $78.82 implies a downside potential of 0.5% from current levels. These analyst ratings are likely to change following ON’s results today.
