As the semiconductor shortage persists, acting as a drag on automotive and other electrical-heavy industries, the actual companies doing the chip manufacturing are baking in the high demand for their products into their future outlooks.
ON Semiconductor Corp. (ON) held its analyst day last Thursday, and enthusiastically announced several sectors in which it expects to see future growth. Currently, the expansion of electric vehicles (EV) and advanced driver-assistance systems (ADAS) are fueling the company’s business performance. (See ON Semiconductor stock charts on TipRanks)
Providing his positive commentary is Vijay Rakesh of Mizuho Securities, who wrote that the company is eyeing the EV/ADAS market, and trying to capture as much of it as possible. Rakesh added that ON is also pursuing the $70 billion total addressable market of Power and Sensing products.
Rakesh maintained a Buy rating on the stock, and kept his price target at $49 per share. This target suggests a potential 12-month upside of 8.22%.
The five-star analyst confidently explained that the rapidly growing EV/ADAS industry requires many technologies which ON manufactures and invests in. Those include insulated gate bipolar transistors, silicon carbide voltage regulators, and sensors like LiDAR and cameras on vehicles. Automotive and infrastructure-related customers make up about 59% of ON’s FY21 revenue, and the company is expecting that number to increase 16% by the end of FY25.
These numbers seem feasible to Rakesh, as the Biden administration has announced its 2030 plan to have half of all vehicles on U.S. roads to be electric. The current amount stands around 13% of all vehicles. With governmental support, the industry is set to see significant acceleration.
Given its planned investments in new technologies, accelerating trends toward EV and ADAS for the automotive industry, and governmental and regulatory backing, Vijay sees strong upside in ON’s stock.
On TipRanks, ON has an analyst rating consensus of Strong Buy, based on 17 Buy and 2 Hold ratings, and 1 Sell rating. The average ON semiconductor price target is $54.05, reflecting a potential 12-month upside of 19.37%. ON closed trading Friday at a price of $45.28 per share.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.