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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 Now
ON 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.
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The 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).
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ON 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.
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