Rating
Buy
Price target
$80
Previous
Implied upside
+30%

Evercore ISI analyst Mark Lipacis reiterated an Outperform rating and $80.00 price target on ON Semiconductor (NASDAQ: ON).

“ON remains a Top Analog pick following our dinner with CEO Hassane El-Khoury, CFO Thad Trent, Chief of Staff Catherine Côté, and Head of IR Parag Agarwal.

We came away incrementally positive on the LT secular trends that ON is primed to benefit from as well as the acute focus on FCF generation + Capital Returns that should translate to a premium P/E over the next 24 months.

Key takeaways from the dinner include: • Silicon Carbide Die Shipments Have Increased Past 4 Years.

While there is a debate around module vs die mix, ON noted that its die-shipments have increased YY for the past 4-years, indicating share-gains vs competitors.

For 2026, mix likely skews slightly more towards die vs 2025, but that mix-shift headwind is largely behind • Silicon Carbide Penetration Increasing…vs MSD-HSD% (nonTSLA, non-BYD) penetration that mgmt highlighted 12-mos prior, penetration is now Mid-Teens% driven by 800V platform launches in China and should continue to trend higher as 90% of RFQs are Silicon-Carbide oriented (with ~30 months lead-time to production) offering strong line of sight to market growth • Power Conversion Steps in DC Consolidating, Improves ON’s Position.

AI Data Centers aiming to shift towards conversion from 800V directly down to 12V or 6V necessitates vendors having full spectrum of power-tree.

ON is amongst a select few that have these products, which should lead to share-gain • Transformation of ON Remains Middle-Innings…with more opportunity in Fab Right strategy, particularly on the back-end (driving 200bps GM expansion potential post-2026), and Treo platform ramp remains in early stages • Impairments Related to Output Efficiencies….in large part related to “Fab Right” strategy, whereby as front- and back-end processes become more efficient, and output climbs, ON is making conscious effort to keep manufacturing footprint lean. • $6bn Buyback Program – Sign of FCF Return Sustained at Higher Level?

Our sense is that the recent up in buyback authorization ($6bn) combined with 2025 FCF return of 100% (vs stated goal of 50%) indicates that ON is entering a period where it is acutely focused on returning FCF to shareholders more significantly than in the past • More Direct Relationships w/ OEMs to Continue… both in form of directed buys and direct OEM purchasing, which should ultimately lead to more ON content per opportunity, as well as potential to avoid future undersupply risks due to OEMs more cautious approach to supply-planning vs Tier-1s.”

This research note is reproduced verbatim from the issuing firm. Price Target never edits, paraphrases or alters analysts’ words — we only republish them in one place.

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