ON Semiconductor Corp (NASDAQ:ON) is a fantastic tech stock that has been providing strong gains to buy-and-hold investors for years. Since 2013, ON stock has advanced 438%, expanding at a compound annual growth rate of 23.4%.
In 2020, this overlooked tech stock climbed 32%. Since bottoming in March 2020 during the coronavirus-fueled sell-off, it has soared 363%. In 2021, ON Semiconductor stock has already rallied 15% as of this writing.
Perhaps not as meteoric as some tech stocks, but those are the kinds of sustainable gains that investors can rely on.
And by all accounts, 2021 will be another year of solid gains for ON stock. Of the 19 analysts providing a 12-month price guidance for ON Semiconductor Corp, the average target is $42.03, which suggests additional upside of 11%. A high estimate of $50.00 represents potential upside of 32%.
Wall Street tends to be quite conservative though, so a 12-month share-price forecast of $55.00 for ON Semiconductor stock is certainly within reach, which points to additional 45% upside from the current level.
Chart courtesy of StockCharts.com
ON Stock Overview
For ON Semiconductor, less is more. The company is a leading supplier of semiconductor-based solutions, with a portfolio of energy-efficient connectivity, sensing, power management, analog, logic, timing, discrete, and custom devices. (Source: “Corporate Fact Sheet,” ON Semiconductor Corp, last accessed February 5, 2021.)
Its products help engineers solve unique design challenges in aerospace, automotive, communications, computing, consumer, defense, industrial, and medical applications.
ON Semiconductor Corp’s three product groups are Advanced Solutions Group, Intelligent Sensing Group, and Power Solutions Group.
The Power Solutions Group provides analog, discrete, module, and integrated semiconductor products for various applications. (Source: “ON Semiconductor Corporation (ON),” Yahoo! Finance, last accessed February 5, 2021.)
The Advanced Solutions Group designs and develops analog, mixed-signal, logic, Wi-Fi, and application-specific integrated circuits and standard products, as well as power solutions. This group also provides foundry and design services.
The Intelligent Sensing Group provides “complementary metal oxide semiconductors and charge-coupled device image sensors, proximity sensors, image signal processors, single photon detectors, and actuator drivers for autofocus and image stabilization.” (Source: Ibid.)
Solid Q4 Results
On February 1, ON Semiconductor announced that its revenue for the fourth quarter ended December 31, 2020 increased three percent year-over-year to $1.4 billion. This included record automotive revenue of $491.0 million. (Source: “ON Semiconductor Reports Fourth Quarter and 2020 Annual Results,” ON Semiconductor Corp, February 1, 2021.)
The fourth-quarter earnings per share were $0.21, versus $0.14 in the same prior-year period. Adjusted earnings per share were $0.35 in the fourth quarter of 2020, compared to $0.30 in the fourth quarter of 2019.
ON Semiconductor Corp’s full-year 2020 operating cash flow increased 27% year-over-year to $884.3 million from $694.7 million in 2019, despite revenue being five percent lower. Full-year 2020 free cash flow increased 212% year-over-year to $500.7 million, from $160.1 million in 2019.
Hassane El-Khoury, president and CEO, commented:
In the fourth quarter, we saw strong improvement in business trends driven by broad-based improvement in global macroeconomic environment, lean inventories, and a steep recovery in the automotive endmarket, in which we continue to see our content growth exceed the overall automotive market growth.
ON Semiconductor stock is a stealth tech stock that has been providing strong capital appreciation for years.
And it continues to have tremendous potential. ON Semiconductor Corp has outstanding assets, targeting the fastest-growing semiconductor end markets with solid margin potential. Based on current trends and the global macroeconomic outlook, the company expects to continue to see above-seasonal demand in the near term.