ON Semiconductor (ON) Stock Forecast & Price Target

ON Semiconductor's strategic pivot towards emerging applications such as electric and autonomous vehicles, coupled with its position as a key supplier in the automotive market, supports a positive financial outlook. The company is expected to enhance its free cash flow (FCF), targeting 25-30% of sales by 2025, despite anticipated revenue declines in 2025, indicating strong operational resilience and commitment to efficient capital management. Furthermore, ON Semiconductor's focus on higher value products and a hybrid manufacturing strategy is likely to improve gross margins and operational efficiency, aligning with its goal of returning 50% of FCF through share repurchases, which may further enhance shareholder value.

The financial outlook for ON Semiconductor reflects significant challenges, as the firm's revenue guidance of $1.4 billion falls 17% short of expectations, alongside an EPS estimate of $0.50 that is 44% below the anticipated $0.89. Management anticipates a decline in gross margins, projecting a drop from approximately 45% in the first three quarters of 2024 to about 38.5% by the second quarter of 2025, exacerbated by falling capacity utilization rates expected to reach the mid-50% range in early 2025. Additionally, notable declines in consumer confidence in China and a decrease in electric vehicle registrations by 30-40% month-over-month in January suggest a weakening demand environment, contributing to a negative outlook for the automotive sector and broader business segments.