onsemi Riding High, But The Ride Doesn't Have To End Soon

onsemi (NASDAQ:ON) (formerly "ON Semiconductor") is rising quickly up my list of go-to examples when I say that successful turnarounds can go much further than the market initially thinks. CEO Hassane El-Khoury has quickly established credibility for the company's margin-improvement efforts, including exiting less-efficient fabs and walking away from low-margin business, and it lends more credibility to a long-term growth story built on rapidly-growing demand for advanced power and sensing/imaging chips across a range of auto, industrial, and compute markets.

I've liked onsemi for a while, and I still do even after a 40% run since my last update. Along with Infineon (OTCQX:IFNNY) and STMicro (STM), I expect onsemi to ride strong demand in power and sensing to high single-digit long-term revenue growth, while company-specific drivers lead to substantially higher margins and free cash flow generation. With updated expectations, I think these shares have near-term upside well into the $70's, though I do see more short-term cyclical risk here.

 

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onsemi Riding High, But The Ride Doesn't Have To End Soon