ON Semiconductor Not Out Of The Woods Yet

I’ve been bullish on ON Semiconductor (ON) for a while, but I thought the shares were a little ahead of themselves back in February, particularly given what I thought were risks that semiconductor companies would see a longer correction process from record high lead times and less growth in 2019. While semiconductor stocks as a whole have continued their upward march (despite some iffier reports), ON shares have underperformed since mid-February, falling slightly against a 15% increase for chip stocks in general and more modest performances from fellow power peers like Infineon (OTCQX:IFNNY), STMicro (STM), and Texas Instruments (TXN).

I’m still concerned about full year expectations for 2019, particularly with record high inventory and what I think will be a weaker second half economy than commonly expected now. Longer term, I still like ON and I think fair value is in the low-to-mid $20’s. Although I hesitate to recommend these shares without reservation because I think there could be a market correction that takes the shares back to around $20, investors who less inclined to try to time the market and/or willing to hold longer term can certainly consider this name today.

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ON Semiconductor Not Out Of The Woods Yet