On Tuesday, Goldman Sachs updated its outlook on ON Semiconductor (NASDAQ:ON), increasing the company's price target to $89 from $81, while reaffirming a Buy rating for the stock. The adjustment follows ON Semiconductor's first-quarter earnings which slightly surpassed expectations, reporting earnings per share (EPS) of $1.08 compared to the anticipated $1.04.
The firm also noted ON Semiconductor's second-quarter non-GAAP gross margin forecast, which at a midpoint of 45.2%, was received positively. Despite the current uncertainties in the Silicon Carbide (SiC) business, as reflected by the management's decision not to provide forward guidance, the analyst maintained a positive long-term stance on the company's growth potential.
The analyst highlighted ON Semiconductor's significant involvement in sectors experiencing secular growth, such as Electrification, Advanced Driver Assistance Systems (ADAS), Energy Infrastructure, and Factory Automation. The company's products command substantial content value in battery electric vehicles (BEVs) and hybrid electric vehicles (HEVs), estimated at around $750 and $350 respectively, compared to just $50 in internal combustion engine (ICE) vehicles.
Goldman Sachs made slight upward revisions to its forward earnings estimates for ON Semiconductor. The firm's updated bull/bear scenario analysis suggests a favorable risk/reward profile for the company's shares. The new 12-month price target of $89 reflects this optimistic outlook, up from the previous target of $81. The Buy rating indicates the firm's confidence in the stock's performance potential.
InvestingPro Insights
Following Goldman Sachs' optimistic update on ON Semiconductor (NASDAQ:ON), InvestingPro data and insights provide additional context for investors considering the company's stock. With a market capitalization of $30.44 billion and a P/E ratio adjusted for the last twelve months as of Q1 2024 standing at 13.86, ON Semiconductor presents an interesting valuation proposition. The company's PEG ratio during the same period is 0.89, which suggests that the stock may be reasonably valued relative to its earnings growth.
The stock has experienced a significant return over the last week, with a 14.82% price total return, reflecting robust investor confidence in the short term. This aligns with the InvestingPro Tips highlighting ON Semiconductor's strong performance over the past week. Despite analysts anticipating a sales decline in the current year, the company maintains a gross profit margin of 46.86%, indicating efficient operations and cost management.
For those seeking more in-depth analysis, InvestingPro offers additional tips on ON Semiconductor, including insights into earnings revisions, industry positioning, and profitability forecasts. Investors can unlock these exclusive tips and enhance their investment strategy by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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