ON Semiconductor (ON) Stock Forecast & Price Target

ON Semiconductor is positioned for growth due to a commitment to returning 50% of free cash flow through share repurchases, reflecting confidence in its financial health and sustainable operating model. Despite a slight decline in gross margin, the firm is expected to benefit from an improved mix of higher value products and strong design wins in electric vehicle platforms, which will support long-term revenue expansion. Moreover, the company's strategy to align its business with emerging markets such as electric vehicles and renewable energy, coupled with a target of 25-30% free cash flow relative to sales in 2025, enhances its potential for improved financial performance as macroeconomic conditions stabilize.

ON Semiconductor's revenue outlook of $1.4 billion fell short of expectations by 17%, with EPS guidance at $0.50, significantly lower than the anticipated $0.89, indicating a substantial earnings miss. The company is projected to experience declining gross margins, with estimates dropping from approximately 45% to around 38.5% over the next year due to decreasing capacity utilization, expected to fall to the mid-50% range by 1Q25. Additionally, a notable downturn in EV registrations in China and a projected 25% quarterly decline in automotive sales highlight a weakening demand environment, further exacerbated by macroeconomic pressures and over-shipment issues in the previous period.