Rosenblatt downgraded ON Semiconductor Corporation (NASDAQ:ON) to Neutral from Buy in a note to clients Monday, maintaining a $95 per share price target.
Analysts there told investors the downgrade is based on slowing automotive demand.
"The shares have had a great run since we initiated coverage in June 2020, increasing from $19 to ~$100, including up 58% YTD," wrote the analysts. "The new management team’s strategy for focusing on the Industrial and Automotive markets allowed for sales growth, margin expansion, and earnings growth to outperform peers."
"We are stepping to the sidelines now as we see increasing evidence of shorter automotive semiconductor lead times and increasing new-vehicle inventory."
The analysts acknowledged that the Automotive and Industrial sectors have been resilient, particularly for analog products based on increasing content. However, they now believe a capacity expansion has caught up to demand, and a correction is due.