Tuesday, ON Semiconductor (NASDAQ:ON) received a positive outlook from Evercore ISI, as the firm initiated coverage with an Outperform rating and a price target of $104.00. The new rating was attributed to the company's positioning as a significant player in the burgeoning Internet of Things (IoT) market, expected to expand to tens of billions of units.
The firm forecasts a substantial expansion of ON Semiconductor's operating margins, projecting an increase of 1300 basis points over the next five years. This growth is anticipated due to the company's leading role in the Silicon Carbide sector, a high-growth area where ON Semiconductor is expected to maintain its market leadership.
Additionally, Evercore ISI predicts a strong increase in the company's free cash flow per share (FCF/Shr), estimating a year-over-year increase of 31% in 2025. This projection underscores the firm's confidence in ON Semiconductor's financial health and its ability to generate substantial cash returns for shareholders.
The analyst's comments further highlight ON Semiconductor's strategic importance in the IoT market, which is seen as a "Tectonic Shift play." The company's product offerings and market position are expected to benefit from the market's rapid expansion, driving revenue and profit growth.
InvestingPro Insights
As ON Semiconductor (NASDAQ:ON) receives a positive outlook from Evercore ISI, a deeper dive into the company's financials through InvestingPro reveals additional insights. With a market capitalization of $28.22 billion and a P/E ratio standing at 12.84, ON Semiconductor is trading at a low price-to-earnings ratio relative to its near-term earnings growth. This could signal an attractive valuation for investors eyeing the semiconductor sector.
The company's revenue for the last twelve months as of Q4 2023 was $8.253 billion, indicating a slight decline of 0.88%. Despite this, ON Semiconductor maintains a robust gross profit margin of 47.06%, reflecting its operational efficiency. Moreover, analysts have highlighted the company's strong positioning within the Semiconductors & Semiconductor Equipment industry, which is poised for growth amid technological advancements in IoT and other sectors.
InvestingPro Tips for ON Semiconductor include the company's ability to cover interest payments with its cash flows and the fact that its liquid assets exceed short-term obligations, indicating a solid financial foundation. For those seeking more in-depth analysis, InvestingPro offers additional tips on the company's financial health and market potential. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the full range of insights available on InvestingPro.
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