ON Semiconductor's Performance Isn't Pretty, But Better Days Are Ahead

I had a mixed view on ON Semiconductor (ON) back in May, as I thought the shares had some appeal on drops below $20, but that there was also still a lot of risk in the outlook as I felt sell-side analysts were too bullish about a second half recovery. That’s all largely come to pass, as ON has continued to struggle with weaker demand in autos and industrials and high inventories, and sell-side expectations have headed down through the year.

Buying below $20 has worked and I continue to believe it will in the near term. I think the market overdid it with the post-earnings jump, as ON’s guidance wasn’t that good, but I guess Texas Instruments (TXN) reset the bar such that any good news was welcomed. While I still believe there are some potholes on the road directly ahead, I like ON’s long-term leverage to EVs, server/cloud power, factory automation/IoT, and renewable energy. Investors can also consider names like Infineon (OTCQX:IFNNY) and STMicro (STM) for those same reasons, but I believe a fair value in the low-to-mid $20’s is sufficient to warrant consideration.

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ON Semiconductor's Performance Isn't Pretty, But Better Days Are Ahead