ON Semiconductor (ON) Stock Forecast & Price Target

Onsemi's strategic pivot toward emerging applications such as electric vehicles and industrial automation positions the company favorably for future growth, evidenced by solid design wins and content gains in EV platforms. Despite a slight decline in gross margins and an upward trend in operational expenditures, Onsemi maintains a strong commitment to returning 50% of free cash flow through share repurchases, enhancing shareholder value. Furthermore, the firm anticipates achieving a free cash flow to sales target of 25-30% by 2025, supported by a robust mix of higher value products and sustainable expense controls, which together indicate a positive outlook for the company's financial performance.

Onsemi's recent revenue outlook of $1.4 billion fell short of expectations by 17%, with EPS guidance significantly lower at $0.50, representing a 44% decline compared to the anticipated $0.89. The company is anticipating a deterioration in gross margins, projected to decrease from approximately 45% to around 38.5% by mid-2025, while capacity utilization is expected to decline to the mid-50% range in the same timeframe. Additionally, weak consumer confidence in China has contributed to a sharp decrease in electric vehicle registrations, with declines of 30-40% month-over-month in January and a further 16% drop in February, reflecting broader macroeconomic pressures affecting Onsemi's automotive segment.