ON - Embedded Expectations Analysis - 2021 09 15
ON Semiconductor Corporation (ON:USA) currently trades above historical averages relative to UAFRS-based (Uniform) earnings, with a 20.0x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about their gross margins, cost reduction initiatives, and their East Fishkill foundry ramp-up.Specifically, management may lack confidence in their ability to improve gross margin, execute their cost reduction initiatives, and improve capacity. Furthermore, they may be exaggerating the sustainability of semiconductor demand, the efficiency of their traction module, and the progress of their East Fishkill 300mm foundry ramp-up. Moreover, management may lack confidence in their ability to manage their inventory and lessen price volatility by moving away from fab filler products. Finally, they may be downplaying concerns about order cancellations and potential issues regarding new product price-to-value discrepancies.
ON Semiconductor is engaged in energy efficient electronics. The company is organized into three segments: Power Solutions Group, which provides a range of discrete, module and integrated semiconductor products; Analog Solutions Group, which designs and develops analog, mixed-signal, and advanced logic application specific integrated circuits and Application Specific Standard Product, and power solutions; and Image Sensor Group, which designs and develops complementary metal oxide semiconductor and charge-coupled device image sensors, as well as proximity sensors, image signal processors and actuator drivers for autofocus and image stabilization for automotive and industrial markets, among others.
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