S&P 500   3,901.36
DOW   31,261.90
QQQ   288.68
S&P 500   3,901.36
DOW   31,261.90
QQQ   288.68
S&P 500   3,901.36
DOW   31,261.90
QQQ   288.68
S&P 500   3,901.36
DOW   31,261.90
QQQ   288.68

onsemi Is A Deep-Value In The Chip Sector 

Monday, May 2, 2022 | Thomas Hughes
onsemi Is A Deep-Value In The Chip Sector 

onsemi Tries To Bottom After Strong Q1 Results 

The correction in tech stocks may not be over, the headwinds within the economy may still be present, but onsemi’s (NASDAQ: ON) Q1 results prove that business is still strong in the chip sector. Specifically, onsemi’s results prove the company’s refocusing efforts are paying off and that is seen in the segment data. The company calls out the auto and industrial markets as drivers of the growth but all three operating segments are up double-digits and underpinning the company’s success.  

“Our focused strategy has delivered sustainable results in onsemi’s margin and growth profile with the automotive and industrial end-markets now representing 65% of our revenue. Our record quarterly results with year-over-year growth of 31% in our first-quarter revenue, and gross margin expansion of 1,420 bps to a record of 49.4% highlight the strength of our business and the value of our products as we continue our transformation. With a highly differentiated portfolio of intelligent power and sensing products, strong visibility driven by long-term supply agreements, and exposure to secular megatrends of vehicle electrification, ADAS, energy infrastructure, and factory automation, we are well-positioned to sustain our momentum,” said Hassane El-Khoury, president and CEO of onsemi.

onsemi Beats On Top And Bottom Line

onsemi had a great quarter with revenue up more than 30% in all three operating segments. The auto and industrial markets accounted for 65% of the net and drove the top line to $1.95 billion. This is up 31.8% over last year and beat the consensus by $0.04 billion albeit this is a slim 2% margin. Moving down to the margin, the news is even better with both the gross and operating margin expanding by more than 1000 basis points. The GAAP and adjusted gross margin are both up 1420 basis points while the GAAP operating margin is up 2480 basis points. The adjusted operating margin is up 2060 basis points and all margin comparisons are up in the sequential comparison as well. On the bottom line, the GAAP $1.18 is up from last year’s $0.20 while the adjusted $1.22 beat the Marketbeat.com consensus by $0.17 and is up from last year’s $0.35. 

Turning to the guidance, the company is expecting sequential improvement at all levels for the coming quarter as well. The best news is the guidance is not only better than the consensus estimates but could easily be beaten as well. The company is expecting $1.965 to $2.065 billion in revenue versus the $1.92 consensus and for EPS of $1.20 at the low end of the range compared to only $1.05 expected by the analysts. The analysts, they rate the stock a solid Buy with a price target more than 25% above the recent price action. There haven’t been any commentaries since the earnings were released but the most recent included price target reductions. Even those, however, have the stock trading near the consensus so we see considerable upside potential for this stock. 

The Technical Outlook: onsemi Is Trying To Bottom 

Price action in onsemi jumped in the wake of the earnings report but has hit resistance in the time since. Resistance is at the short-term moving average and may keep price action from advancing but we see a bottom beginning to form. Assuming the stock is able to maintain support above $51, we would expect to see sideways trading at this level until the market balance shifts back in favor of the bulls, or new news comes out. Until then, onsemi is a value in the semiconductor space and trades at only 12.5X its earnings. 

onsemi Is A Deep-Value In The Chip Sector 

Should you invest $1,000 in ON Semiconductor right now?

Before you consider ON Semiconductor, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and ON Semiconductor wasn't on the list.

While ON Semiconductor currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The 5 Stocks Here


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
ON Semiconductor (ON)
2.2124 of 5 stars
Compare These Stocks  Add These Stocks to My Watchlist 


Premium Research Tools

MarketBeat All Access subscribers can access stock screeners, the Idea Engine, data export tools, research reports, and other premium tools.

Discover All Access

Market Data and Calendars

Looking for new stock ideas? Want to see which stocks are moving? View our full suite of financial calendars and market data tables, all for free.

View Market Data

Investing Education and Resources

Receive a free world-class investing education from MarketBeat. Learn about financial terms, types of investments, trading strategies and more.

Financial Terms
Details Here
MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more about MarketBeat.

MarketBeat is accredited by the Better Business Bureau MarketBeat is rated as Great on TrustPilot

© American Consumer News, LLC dba MarketBeat® 2010-2022. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | U.S. Based Support Team at [email protected] | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security.

Our Accessibility Statement | Terms of Service | Do Not Sell My Information | RSS Feeds

© 2022 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer. Fundamental company data provided by Zacks Investment Research.