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Why ON Semiconductor (ON) Is Up 14.3% After Boosting Buybacks And Accelerating GaN Power Push

Simply Wall St · 3d ago
  • In recent days, ON Semiconductor has launched a greatly expanded US$6.00 billion share repurchase program and advanced a 650V Gallium Nitride power semiconductor initiative with GlobalFoundries, backed by European Union subsidies for capacity expansion in Dresden.
  • This combination of sizeable capital returns and a push into higher-value power solutions for AI data centers and electrified transport underscores how ON Semiconductor is reshaping its portfolio toward areas where efficient energy management is becoming increasingly critical.
  • We’ll now examine how the enlarged buyback program may influence ON Semiconductor’s investment narrative built around power and AI growth.

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ON Semiconductor Investment Narrative Recap

To own ON Semiconductor, I think you need to believe its focus on high value power and sensing for EVs, industrials and AI data centers will compensate for current cyclical softness and portfolio exits. The expanded US$6.0 billion buyback supports the equity story but does not materially change the key near term catalyst, which remains a recovery in automotive and industrial demand, or the main risk around underutilized capacity and pressure on margins.

The GlobalFoundries partnership on 650V Gallium Nitride devices, supported by EU subsidies in Dresden, looks most relevant here because it directly targets higher efficiency power solutions for AI data centers and electrified transport. If customer adoption and end market demand improve, this type of higher value content can help ON Semiconductor better absorb capacity and potentially ease some of the margin strain tied to today’s weaker utilization.

Yet even with these promising initiatives, investors should be aware that persistent underutilization of ON Semiconductor’s fabs could continue to weigh on profitability if demand remains soft and ...

Read the full narrative on ON Semiconductor (it's free!)

ON Semiconductor's narrative projects $7.5 billion revenue and $1.9 billion earnings by 2028. This requires 5.4% yearly revenue growth and about a $1.4 billion earnings increase from $465.8 million today.

Uncover how ON Semiconductor's forecasts yield a $58.70 fair value, a 5% downside to its current price.

Exploring Other Perspectives

ON 1-Year Stock Price Chart
ON 1-Year Stock Price Chart

Twelve members of the Simply Wall St Community currently see ON Semiconductor’s fair value between US$44.08 and US$70.00, reflecting a wide spread of expectations. Against that backdrop, the key operational question is whether ON Semiconductor can lift fab utilization from today’s constrained levels, since prolonged underuse of capacity may keep margins under pressure and influence how those different valuations ultimately play out.

Explore 12 other fair value estimates on ON Semiconductor - why the stock might be worth 29% less than the current price!

Build Your Own ON Semiconductor Narrative

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.