Key Takeaways
- Goldman Sachs initiates coverage of ON Semiconductor with a “Neutral” rating and a price target of $60.
- The company is expected to benefit from a cyclical recovery due to strong channel management and cost initiatives.
- Concerns over automotive sector forecasts may impact ON Semiconductor’s performance due to potential price increases influenced by tariffs.
Goldman Sachs Coverage and Market Outlook
ON Semiconductor Corporation (NASDAQ: ON) has garnered attention as one of the top semiconductor stocks recommended by Reddit users. Goldman Sachs analyst James Schneider has begun coverage of the company, assigning a “Neutral” rating and setting a price target of $60. This initiative is part of a broader analysis of the U.S. analog and radio frequency semiconductor sector, which Goldman Sachs views positively due to expected cyclical opportunities.
The firm notes that ON Semiconductor is well-positioned to capitalize on an anticipated cyclical recovery, backed by effective channel management and various restructuring measures. Schneider pointed out that the overall analog industry is projected to align with trendline shipments in the next 12 to 18 months. He specifically highlighted companies that have been shipping significantly below trend and those that have managed their supply chains effectively, which puts ON Semiconductor in a favorable position.
In its Q1 2025 results, ON Semiconductor demonstrated its disciplined approach by managing its cost structure, optimizing its manufacturing footprint, and streamlining its portfolio. The company also reported strong momentum in design wins, attributed to its industry-leading product performance.
In a recent investor letter, Columbia Threadneedle Investments maintained overweight positions in semiconductor companies, including ON Semiconductor, despite these investments detracting from their fund’s performance relative to benchmarks. ON Semiconductor’s production historically relies on the automotive sector, which faces uncertain forecasts. Recent U.S. tariff announcements hint at possible price increases in new vehicles, which may affect sales in that segment. If the current administration continues to enforce substantial reciprocal tariffs, significant price hikes are likely to be passed onto consumers in the automotive market.
Although ON Semiconductor represents a potentially sound investment, there are concerns regarding its performance amidst market volatility. Other AI stocks are viewed as offering greater potential upside and lower risks, leading analysts to recommend exploring these alternatives. Investors are encouraged to consider a free report highlighting undervalued AI stocks poised to benefit from ongoing trends, including the impact of tariffs and onshoring.
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