ON Semiconductor Faces Near-Term Challenges with Declining Demand and Revenue in Automotive Sector

Analyst Harlan Sur of J.P. Morgan maintained a Hold rating on ON Semiconductor (ON – Research Report), with a price target of $60.00.

Harlan Sur has given his Hold rating due to a combination of factors impacting ON Semiconductor’s near-term performance and outlook. The company reported weaker-than-expected results for the December quarter, primarily due to soft demand trends and inventory adjustments by customers. The outlook for the upcoming quarter indicates a significant revenue decline, particularly in the automotive sector, which is expected to decrease by 25% quarter-over-quarter.
Additionally, ON Semiconductor faces challenges in its China SiC business due to a pause in the China EV market and unfavorable pricing dynamics affecting its non-core business. These factors contribute to a low visibility environment, prompting the company to lower its manufacturing utilization rate and expect a decline in gross margins. Despite these challenges, ON Semiconductor is implementing restructuring initiatives to improve its cost structure, but the expected recovery is not anticipated to be immediate, leading to the Hold rating.

Based on the recent corporate insider activity of 53 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of ON in relation to earlier this year.