Bear of the Day: ON Semiconductor (ON)

ON Semiconductor ON is facing setbacks within the historically cyclical chip industry, exacerbated by headwinds in the electric vehicle (EV) space and the industrial sector.ON Semi provided downbeat earnings guidance once again when it reported its Q4 results in early February.ON stock has declined 22% over the last three years, while the Zacks Tech Sector surged 50%. Wall Street has soured on the chip stock amid shifting industry conditions that have led to declining earnings and revenue.What’s Going Wrong with ON Stock Right NowON Semi is a standout in the analog chip industry, offering solutions for the industrial and automotive sectors. Over the past few years, the company has focused on boosting margins and exiting low-margin, non-core products. A pivotal 2021 acquisition transformed ON Semi into a silicon carbide supplier, a key material used in EVs, chargers, energy infrastructure, and more.ON Semi posted strong growth in 2021 and 2022, fueled by soaring EV sales and increased spending on sustainable energy and industrial automation. However, the company operates in a cyclical business tied to the broader boom-and-bust spending patterns of the automotive and industrial sectors.Image Source: Zacks Investment ResearchThe EV market is currently experiencing a downturn after years of rapid growth, and industrial markets are also slowing. ON Semi’s revenue fell 14% in 2024, following a 1% decline in 2023. Meanwhile, its earnings dropped 23% last year after a 3% dip in FY23.On February 10, ON Semi issued dismal EPS guidance, causing its Q1 consensus estimate to plunge 45%. Over the past few months, its earnings estimates for 2025 and 2026 have fallen 40% and 29%, respectively, contributing to its Zacks Rank #5 (Strong Sell).Image Source: Zacks Investment ResearchON Semi’s long-term outlook likely remains solid, and the company is confident it can weather these near-term challenges. “Our actions over the last four years have proven we are a structurally different company that is well-equipped to navigate prolonged volatility,” CEO Hassane El-Khoury said in prepared remarks.That said, investors might want to look elsewhere for now. Calling a bottom for ON Semi could be particularly challenging, as uncertainty has intensified across the stock market and the economy, driven in part by ongoing tariff battles.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant 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 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