ON Semiconductor: Powering Up For Industrial And EV Growth, Analyst Says

  • Mizuho analyst Vijay Rakesh reiterated a Buy rating on ON Semiconductor Corporation ONraising the price target to $90 from $88.
  • The analyst believes ON is well positioned for industrial growth and is "an EV and Camera Automotive content story" with additional tailwinds from servers and computing with better top-line growth and improving margins.
  • The company has significant opportunities to expand its top line and drive EPS, as GMs are trending better, the analyst notes.
  • Based on the above, FY23 revenue is raised from $8 billion to $8.21 billion. EPS is raised from $4.47 to $4.90. 
  • However, the analyst expects utilization to remain in the low 70% range for the remainder of 2023 as the company stays cautious in the face of macro headwinds. 
  • ON maintains its $1 billion/year run-rate while it sees its cloud/5G business growing at an 11% 2021-2025 CAGR. On May 1, the company reported first-quarter FY23 revenue growth of 1% year-on-year to $1.96 billion. The company expects second-quarter adjusted revenue of $1.975 billion-$2.075 billion. 
  • Price Action: ON shares are trading up 1.19% at $79.26 on last check Tuesday.
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