Notwithstanding apprehensions concerning the timing of a recovery in the semiconductor cycle, one analyst at Benchmark is upbeat about the prospects of ON Semiconductor Corp (NASDAQ: ON).
Ruben Roy initiated coverage of ON Semiconductor at Buy with a $26 price target.
ON has executed well in recent years to shift the company's product mix to higher value markets, analyst Roy said in a Friday morning note. This shift in exposure to higher-end markets such as automotive, industrials and cloud/data center markets should ultimately yield margin leverage, he added.
As opposed to the broader semiconductor market, which is expected to grow at a 4% CAGR through 2022, ON expects CAGRs of 9%, 6% and 13%, respectively for its strategic target markets of automotive, industrial and cloud/data center, Roy noted.
Despite the expected demand recovery not materializing, the analyst said he is encouraged with continued inventory corrections and the company's belief it is under-shipping true end demand.
This, according to the analyst, should support a strong recovery when demand improves.
"...many of ON's focus market design wins are single-sourced as opposed to being multi-sourced in the computing and consumer markets, which ultimately should lead to more stability in top-line performance, in our view," Benchmark said.
The firm sees the company's valuation as attractive ahead of earnings acceleration.
"As ON continues to execute on its longer-term product road-map and end market targets, we expect continued multiple expansion to follow," the firm added.
ON shares were up 0.46% to $19.64 at time of publishing.
Christian Fromhertz's Taiwan Semiconductor Trade
Nomura On Semiconductors: Analyst Eyes Data Center, PC Trends
Latest Ratings for ON
|Sep 2019||Initiates Coverage On||Buy|
|Aug 2019||Upgrades||Market Perform||Strong Buy|
View More Analyst Ratings for ON
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