ON Stock: Onsemi Outpacing Rivals In Silicon Carbide Chips

ON Semiconductor (ON) is aiming to grow at three times the rate of the overall chip industry over the next five years thanks to its investments in silicon carbide chips. ON stock surged after the company announced its new growth forecasts this week.


Also known as Onsemi, ON Semiconductor held an analyst day briefing on Tuesday in New York City. At least six brokerage firms raised their price targets on ON stock after the presentation.

ON stock is near a buy point of 87.65 out of a 14-week consolidation period, according to IBD MarketSmith charts.

However, on the stock market today, ON stock dropped 2.5% to close at 84.36.

Several major semiconductor stocks have broken out of bases recently. They include Advanced Micro Devices (AMD), Broadcom (AVGO) and Rambus (RMBS).

ON Stock: Onsemi Ups Growth Targets

“We like Onsemi’s strength in auto/industrial with SiC driving the next global energy transformation and a solid revenue/margin roadmap to 2027,” Mizuho Securities analyst Vijay Rakesh said in a note to clients. He rates ON stock as buy with a price target of 93.

Silicon carbide, or SiC, chips can operate at much higher voltages, temperatures and frequencies than traditional silicon-based semiconductors. That makes them a better choice for electric vehicles, solar power conversion, 5G wireless, aerospace and other applications.

ON Semiconductor raised its top-line compound annual growth rate target to 10-12% through 2027. Its previous growth target was 8%. By comparison, the semiconductor industry growth rate is forecast at 4% over the same period. Onsemi also raised targets for profit margins.

Silicon carbide semiconductors are the fastest-growing product line at Onsemi. The company sees its sales of SiC chips growing at a compound annual rate of 70% through 2027. Onsemi expects to grab 35% to 40% of the SiC market by 2027, up from 14% now.

ON Semiconductor Is A Tech Leader

Other chipmakers pursuing the silicon carbide chip market include Infineon Technologies, STMicroelectronics (STM) and Wolfspeed (WOLF). STMicro currently leads the SiC market with 37% share, followed by Infineon with 19% and Wolfspeed at 16%, according to Mizuho.

However, ON Semiconductor has an edge over the competition in silicon carbide devices because it controls everything from wafers, chip fabrication and packaging, Piper Sandler analyst Harsh Kumar said in a note to clients. He rates ON stock as overweight with a price target of 100.

ON Semiconductor ranks fourth out of 30 stocks in IBD’s semiconductor manufacturing industry group, according to IBD Stock Checkup. ON stock has an IBD Composite Rating of 92 out of 99.

IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.

Also, ON stock is on the IBD Tech Leaders list.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.


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