ON Semiconductor's Q4 Revenues Down 15% As Automotive Industry Hits Massive Speed Bump, 7 Analysts Cut Forecasts On Continued Demand Weakness

Shares of ON Semiconductor Corp ON were climbing in early trading on Tuesday, despite the company reporting a steep decline in fourth-quarter revenues.

The company reported its quarterly results amid an exciting earnings season. Here are some key analyst takeaways.

Stifel On ON Semiconductor

Analyst Tore Svanberg reiterated a Hold rating, while slashing the price target from $60 to $52.

ON Semiconductor reported its fourth-quarter revenue at $1.72 billion, down 2.2% sequentially and 14.6% year-on-year, which missed the midpoint of the guidance range, Svanberg said in a note. Management indicated that a decline in demand towards the end of the quarter had continued into the first quarter, he added.

The midpoint of the company's first-quarter revenue guidance implies a 18.7% sequential decline and 24.8% year-on-year decline, the analyst stated. The non-GAAP earnings guidance of 45 cents per share to 55 cents per share came in "lower than our below-Street estimate" of 91 cents per share, he further wrote.

Roth Capital Partners On ON Semiconductor

Analyst Suji Desilva maintained a Buy rating, while cutting the price target from $100 to $60.

ON Semiconductor's revenues were hit by "continued muted demand, reflecting inventory digestion, Desilva said. Management guided to first-quarter revenues of $1.35 billion to $1.45 billion, significantly below consensus expectations of $1.69 billion, he added.

"We believe ON's near-term outlook and visibility are impacted by the ongoing auto EV demand challenges, particularly in Asia," the analyst wrote. He stated, however, that it is encouraging that ON Semiconductor is "managing its own inventory and business portfolio to maintain profitability and leverage opportunity in a recovery."

Morgan Stanley On ON Semiconductor

Analyst Joseph Moore reaffirmed an Underweight rating, while reducing the price target from $52 to $44.

ON Semiconductor guided to a 19% sequential decline in revenues in the first quarter, with automotive down 25% "due to inventory digestion at Chinese customers as well as general weakness across all regions," Moore said. Auto semiconductor peers have guided to "far softer declines," he added.

This is because of ON Semiconductor's performance is being impacted by its "more aggressive enforcement" of long-term supply agreement (LTSAs) and heightened competition in silicon carbide, image sensors, and insulated-gate bipolar transistors (IGBTs) for players that have a lower gross margin, the analyst stated. "ON has derisked 2025 to a certain extent, but we do see more structural factors weigh on the eventual recovery," he further wrote.

Check out other analyst stock ratings.

JPMorgan On ON Semiconductor

Analyst Harlan Sur reiterated a Neutral rating, while cutting the price target from $88 to $60.

Amid persistent demand challenges, the company's prospects are deteriorating as the current quarter progresses, Sur said. The 19% sequential decline in revenues projected by ON Semiconductor is "more pronounced than market expectations" and is led by automotive, he added.

The company is being impacted by sluggishness in its China SiC business, with an EV pause in the country and revenue headwinds in its non-core business due to "increasingly unfavorable pricing dynamics," the analyst wrote. ON Semiconductor has decided to pull out of its low-margin businesses due to the unfavorable pricing, he further stated.

Needham On ON Semiconductor

Analyst Quinn Bolton maintained a Buy rating, while reducing the price target from $66 to $57.

The slowdown in China's automotive market is expected to continue in the first quarter, "as OEMs work through inventory that has been built up over the last couple quarters, along with factory shutdowns attributed to Chinese New Years," Bolton said. This slowdown also impacts SiC, he added.

ON Semiconductor has guided to gross margin contraction, with about half of the decline being attributed to the significant decline in revenues and the rest from underutilization and an unfavorable product mix, the analyst stated. The company has decided to walk away from certain non-core business opportunities due to "aggressive pricing the company is experiencing in certain products," Bolton wrote.

Rosenblatt Securities On ON Semiconductor

Analyst Kevin Cassidy reaffirmed a Neutral rating, while slashing the price target from $75 to $49.

Both revenues and earnings met the lower end of the guidance range, Cassidy said. The deteriorating EV demand in China is mainly due to early Lunar New Year shutdowns, while demand weakness in Europe is driven by a 10% decline in December registrations, he added.

"Tier 1 suppliers in the U.S. also faced slower-than-expected EV adoption, contributing to weaker automotive demand," the analyst wrote. While there are "some green shoots," like ON Semiconductor's unique Treo Platform and datacenter power traction, weakness in the automotive and industrial end market demand "overshadow these positives in the near-term," he stated.

Goldman Sachs On ON Semiconductor

Analyst Toshiya Hari reiterated a Buy rating, while reducing the price target from $77 to $64.

Although ON Semiconductor's automotive revenues declined on a year-on-year basis, they grew by 8% sequentially to $1.03 billion, Hari said. Management is commitment to "right-sizing and optimizing the company's manufacturing footprint and business portfolio," he added.

ON Semiconductor is improving its competitive position in SiC and has an "industry-leading position in auto-grade CMOS image sensors," the analyst stated. The company has the "potential for above-average margin expansion coming out of the downturn."

ON Price Action: Shares of ON Semiconductor had risen by 2.44% to $48.19 at the time of publication on Tuesday.

Read More: Auto Slowdown Hits ON Semiconductor In Q4 — Q1 Outlook Also Dim: CEO Warns of ‘Persisting Volatility Due To The Geopolitical Uncertainty

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