ON Semiconductor’s Stock Followed the Industry Downward Trend



ON’s stock at a glance

So far, we have seen that ON Semiconductor (ON) reported declining revenues due to weakness in the macroeconomic environment and softness in the overall semiconductor industry. Like other semiconductor companies, even ON Semiconductor reported weaker guidance for fiscal 1Q16. Let us see how the company’s stock fared during the quarter.

ON Semiconductor stock has a market capitalization of $3.10 billion. Its PE (price-to-earnings) ratio of 29.19x is higher than rival Texas Instruments’ (TXN) ratio of 18.61x but lower than STMicroelectronics’ (STM) ratio of 45.68x. This indicates that ON’s stock is trading at 29 times the price of its EPS (earnings per share).

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Stock price movement

ON Semiconductor’s stock is currently trading at $7.50, which is at the lower end of its 52-week range of $6.97–$13.50. Like rivals TXN and STM, ON’s shares started a downward trend in January 2016 after hovering on the higher end of its 52-week range in December 2015.

However, ON’s stock reported a reverse trend and rose by 6% on February 16, 2016, when Fairchild Semiconductor (FCS) announced that ON’s bid was superior from that tendered by the Chinese (FXI) group. On the other hand, Fairchild’s stock fell ~3% to $19.87 on the same day.

ETF holdings

Of ON Semiconductor’s total market capitalization, 1.77% is held by 38 ETFs. Two ETFs that invest in large-cap stocks across various industries, the iShares Russell 1000 ETF (IWB) and the iShares Russell 1000 Growth ETF (IWF), have 0.02% and 0.03% exposure in ON, respectively.

Overall, ON Semiconductor’s growth would depend on the successful integration of Fairchild Semiconductor (FCS) and the realized synergies from the two acquisitions—Fairchild and Aptina. The Automotive segment should be the key market driving future growth.


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