ON Semiconductor Plunges 35% YTD: Buy, Sell or Hold the Stock?

ON Semiconductor ON shares have lost 34.5% year to date, underperforming the Zacks Semiconductor - Analog and Mixed industry’s decline of 5.9% and the Zacks Computer & Technology sector’s 3.7%.The decline in ON Semiconductor’s share price can be attributed to weak growth across Power Solutions Group (PSG), Analog and Mixed Signals Group (AMG) and Intelligent Sensing Group (ISG). In the recently concluded first-quarter 2025, PSG revenues (contributed 44.6% to revenues) fell 26.2% year over year. AMG revenues (39.2% of revenues) declined 18.7% year over year, while ISG revenues (16.2% of revenues) saw a decline of 19.7% year over year.Weak demand in the automotive sector due to geopolitical tensions and a slowdown in EV adoption has negatively impacted ON Semiconductor’s growth. In first-quarter 2025, Automotive (52.7% of revenues) revenues fell 25.1% year over year, while Industrial (27.7% of revenues) end-market (including military, aerospace, and medical) revenues declined 16% year over year. However, AI data centers have evolved as a major growth market for ON Semiconductor. In the first quarter of 2025, AI data center revenues more than doubled year over year. The company is leveraging its silicon carbide and silicon-powered devices to gain traction. At the entry point of power into the data center, ON Semiconductor is benefiting from the transition to modular UPS systems with its EliteSiC power module solutions, delivering higher efficiency and power density than traditional silicon solutions. ON expects revenues from UPS to grow between 40% and 50% by 2025. ON Semiconductor Corporation Price and Consensus ON Semiconductor Corporation price-consensus-chart | ON Semiconductor Corporation Quote ON Suffers From Stiff CompetitionON Semiconductor is facing stiff competition from industry peers like Magnachip Semiconductor MX, NXP Semiconductors NXPI and Analog Devices ADI. In the year-to-date period, shares of Magnachip Semiconductor, NXP Semiconductors and Analog Devices have declined 8.4%, 7.5% and 0.9%, respectively.Analog Devices is benefiting from strong momentum across the industrial and automotive end markets. Strong momentum across the EV space on the back of its robust Battery Management System solutions remains a tailwind. Meanwhile, NXP Semiconductors is benefiting from strong demand for electrification, AI-driven edge computing and secure connectivity solutions. Magnachip Semiconductor is capitalizing on the steady demand in the consumer electronics space, led by its focus on power and display solutions.ON Semiconductor Faces Pricing Pressure and Low UtilizationOwing to reduced demand, ON expects low single-digit price cuts. This is negatively impacting revenues and gross margin. The demand is, however, not expected to pick up in the next few quarters due to global supply chain disruptions and uncertainty around tariff impositions. Hence, the growth outlook remains slow. Alongside, ON Semiconductor is facing the underutilization of its manufacturing capacity due to weak end-market demand. The utilized manufacturing capacity for the first quarter of 2025 remained at 60% and is expected to decline over the next quarter. Lower utilization has led to underabsorption of fixed costs, which is negatively impacting the margins and bottom line. In the first quarter of 2025, gross margin declined by 590 basis points (bps) year over year to 40%. Management expects approximately 900 bps of non-cash underabsorption charges for the second quarter. Both pricing pressure and lower utilization create a significant negative impact on gross margin.ON Offers Weak Q2 GuidanceFor the second quarter of 2025, ON Semiconductor expects revenues between $1.40 billion and $1.50 billion. Non-GAAP earnings for the second quarter of 2025 are envisioned between 48 cents per share and 58 cents per share. The Zacks Consensus Estimate for second-quarter 2025 revenues is pegged at $ 1.45 billion, suggesting a 16.48% decline from the year-ago quarter’s reported figure.The consensus mark for earnings is pegged at 54 cents per share, implying a steep 43.75% decline from the year-ago quarter’s reported figure. However, the earnings figure inched up by a penny over the past 30 days.Can ON’s SiC Leadership Boost Prospects?ON Semiconductor is experiencing robust momentum in its Silicon Carbide (SiC) portfolio. In the first quarter of 2025, ON Semiconductor acquired Qorvo’s SiC JFET assets, which strengthens its SiC offerings. For its fourth-gen Trench SiC MOSEFT, the company secured a major design win with a leading U.S. OEM for a PHEV platform. ON Semiconductor is targeting a 35-40% market share in the near future and has recently started seeing revival in the China market, with 50% of new EV models in China expected to have ON’s SIC in it, thus signalling strong global traction.ON Semiconductor’s SiC and silicon-based intelligent power portfolio is being increasingly adopted in UPS systems, power supply units and battery backup units as they are engineered for high efficiency and high-density applications. Sic JFET and T10 trench MOSFET provide industry-leading performance by offering the lowest on-resistance and reducing switch losses, respectively. These high-performing solutions helped ON Semiconductor secure business with the three largest UPS providers, thus deepening market penetration.Zacks RankON Semiconductor currently has a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.0% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Analog Devices, Inc. (ADI): Free Stock Analysis Report NXP Semiconductors N.V. (NXPI): Free Stock Analysis Report Magnachip Semiconductor Corp. (MX): Free Stock Analysis Report ON Semiconductor Corporation (ON): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks