has played a leading role in its industry lately, as the stock has gained 26.11% in the past month and 28.21% in the past three months.
ON rose to a fresh high of $72.15 on Monday before pulling back slightly on Tuesday and pulling back along with the broader market on Wednesday.
Year-to-date, ON is up 4.11%. That normally doesn’t sound like much, but in a year when the S&P 500 is down 9.95% and the S&P tech sector is down 13.07%, that’s quite an achievement.
It is also worth comparing ON’s performance to the Philadelphia Semiconductor Index, which is followed by the Invesco PHLX Semiconductor ETF (NYSEARCA: SOXQ).
There is certainly a difference between ON’s gains and the performance of the broad index, although the current trend is up. Recent index returns are as follows:
- 1 month: +13.27%
- 3 months: +4.43%
- Year to date: -22.94%
So what’s behind onsemi’s outperformance compared to the broader sector?
For starters, the stock has surpassed analysts’ earnings and earnings every quarter since August 2020. In the most recent quarter, onsemi earned $1.34, ahead of consensus estimates of $1.26 per share. Revenue of $2.09 billion also exceeded expectations.
For the full year, ON is expected to earn $5.12 per share, which would be a 74% gain.
Ready to retire?
With the stock hitting new highs after a rally that started in early July, is there a pullback in the cards?
The current P/E ratio is 16, so not very high by growth stocks.
Data from MarketBeat analysts show that Wall Street has a consensus price target of $73.30 for the stock, up 7.33%. Remember: that target could take 12 to 18 months, meaning the stock could pull back before that number is reached.
One thing impressed analysts: The company itself raised its targets for its silicon carbide technology, which is used in electric vehicles, among other things. More than half of ON’s revenue comes from the automotive and other growing industries. Sure, that gives the company some risk, if there’s a cyclical decline in its customers’ industries, but it’s also pretty clear that the EV market represents healthy future growth.
But not all chip companies follow the same price appreciation trajectory as ON Semi.
Nvidia’s Lowered Forecast
Colleague large-cap chip Nvidia, which specializes in graphics cards for gaming, cryptocurrency mining and other uses, including automobiles, has been correcting since late November. Nvidia’s price peaked around the same time that the S&P 500 began to wobble before the broader index finally flipped in January.
There is less optimism about Nvidia right now, given the company’s own forecasts for 3% year-over-year revenue growth in the quarter ended July 31. That’s less than an earlier forecast, largely due to revenue is declining among its customers in the gaming industry.
Wall Street expects Nvidia to earn $4.33 per share for the full year. That profit target has recently been revised downwards.
Since this company will report earnings on August 24, it is wise to exercise caution if you are considering a purchase at this time. Even the slightest negative comment in the report can send a stock sharply lower. That’s true, even if a company exceeds expectations.
AMD Rated “Average Purchase”
AMD has also been correcting since late last year, although the company’s earnings and outlook remain strong. AMD topped analysts’ opinions in the most recent quarterly report, and Wall Street revised its full-year earnings forecast higher to $4.35 a share, which would be a 56% year-over-year increase.
AMD’s main product lines include microprocessors and embedded processors, graphics processors and semiconductor devices used in servers, personal computers and network systems.
According to data from MarketBeat analystsThe consensus rating for the stock is “moderate buy,” with a price target of $125.93, upside potential of 28.15%.