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ON Semi Benefits from Expanding Product Portfolio & Buyouts
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ON Semiconductor Corp (ON - Free Report) is firing on all cylinders, which is evident from the stock’s gain of 64.2% in the last one year, which comfortably surpassed the Zacks Semiconductor- Analog & Mixed industry’s increase of 41.3%. The outperformance is more obvious when compared with S&P 500 market that has gained 18.1% in the same period.
The significant upside can be attributable to the company’s expanding product portfolio, improving end markets, completion of the Fairchild acquisition along with diversification across end markets & geographies.
Notably, the addition of Fairchild has positively impacted revenues, which jumped 33% sequentially and 50.1% year over year to $1.26 billion in fourth-quarter 2016. (Read More: ON Semiconductor Posts Strong Q4 Earnings, Guides Well)
We believe that ON Semi’s planned focus on smartphone, automotive and industrial end markets is a key catalyst. The company continues to acquire – like the recently announced mmWave technology for automotive image applications – that will boost presence in the sector.
We note that the company has beaten the Zacks Consensus Estimates in three of trailing the four quarters with average positive surprise of 13.32%. Moreover, current year estimates have increased 7.8% to $1.24 in the last 30 days driven by the positive vibes around innovative product pipeline and accretive acquisitions.
Expanding Image Sensor Portfolio Key Driver
ON Semi’s recent acquisition of mmWave technology, developed by International Business Machines (IBM - Free Report) Haifa research team, will boost automotive image sensor product portfolio.
We note that the automotive end market represented approximately 20% of the company’s revenues, which grew more than 25% in full-year 2016. The company is trying to de-emphasize the low-margin image sensor business (25% of the automotive market) related with smartphones & consumer end markets along with focus on the fast growing automotive segment.
ON Semi’s results will continue to benefit from strong demand of image sensors and integrated coprocessors for advanced driver assistance systems (ADAS) applications. Management noted that increasing safety requirements driven by NCAP and star ratings are driving steep adoption of ADAS and a higher number of cameras in vehicles.
We believe that rapid proliferation of autonomous vehicle markets presents significant growth opportunity for the company’s automotive product portfolio going ahead.
Accretive Fairchild Acquisition
The Fairchild acquisition is expected to propel ON Semi toward a leadership position in the power semiconductor space. The company remains on track to achieve annual synergies run rate target of $160 million exiting 2017.
Management noted that Fairchild bookings improved significantly in the fourth quarter. Moreover, significant cross-selling opportunities in various end markets, extension of existing customer relationships and expanding sales as well as distribution network of the combined company will drive penetration.
ON Semi expects to gain market share in the rapidly-charging handset market by cross-selling Fairchild’s solution, which has significant customer base in the Chinese OEM market.
Long-term earnings growth rate for Microchip and Silicon Laboratories is pegged at 14.5%, and 12.5%, respectively compared with ON Semi’s 14.8%.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
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ON Semi Benefits from Expanding Product Portfolio & Buyouts
ON Semiconductor Corp (ON - Free Report) is firing on all cylinders, which is evident from the stock’s gain of 64.2% in the last one year, which comfortably surpassed the Zacks Semiconductor- Analog & Mixed industry’s increase of 41.3%. The outperformance is more obvious when compared with S&P 500 market that has gained 18.1% in the same period.
The significant upside can be attributable to the company’s expanding product portfolio, improving end markets, completion of the Fairchild acquisition along with diversification across end markets & geographies.
Notably, the addition of Fairchild has positively impacted revenues, which jumped 33% sequentially and 50.1% year over year to $1.26 billion in fourth-quarter 2016. (Read More: ON Semiconductor Posts Strong Q4 Earnings, Guides Well)
We believe that ON Semi’s planned focus on smartphone, automotive and industrial end markets is a key catalyst. The company continues to acquire – like the recently announced mmWave technology for automotive image applications – that will boost presence in the sector.
We note that the company has beaten the Zacks Consensus Estimates in three of trailing the four quarters with average positive surprise of 13.32%. Moreover, current year estimates have increased 7.8% to $1.24 in the last 30 days driven by the positive vibes around innovative product pipeline and accretive acquisitions.
Expanding Image Sensor Portfolio Key Driver
ON Semi’s recent acquisition of mmWave technology, developed by International Business Machines (IBM - Free Report) Haifa research team, will boost automotive image sensor product portfolio.
We note that the automotive end market represented approximately 20% of the company’s revenues, which grew more than 25% in full-year 2016. The company is trying to de-emphasize the low-margin image sensor business (25% of the automotive market) related with smartphones & consumer end markets along with focus on the fast growing automotive segment.
ON Semiconductor Corporation Revenue (TTM)
ON Semiconductor Corporation Revenue (TTM) | ON Semiconductor Corporation Quote
ON Semi’s results will continue to benefit from strong demand of image sensors and integrated coprocessors for advanced driver assistance systems (ADAS) applications. Management noted that increasing safety requirements driven by NCAP and star ratings are driving steep adoption of ADAS and a higher number of cameras in vehicles.
We believe that rapid proliferation of autonomous vehicle markets presents significant growth opportunity for the company’s automotive product portfolio going ahead.
Accretive Fairchild Acquisition
The Fairchild acquisition is expected to propel ON Semi toward a leadership position in the power semiconductor space. The company remains on track to achieve annual synergies run rate target of $160 million exiting 2017.
Management noted that Fairchild bookings improved significantly in the fourth quarter. Moreover, significant cross-selling opportunities in various end markets, extension of existing customer relationships and expanding sales as well as distribution network of the combined company will drive penetration.
ON Semi expects to gain market share in the rapidly-charging handset market by cross-selling Fairchild’s solution, which has significant customer base in the Chinese OEM market.
Zacks Rank & Key Picks
ON Semi sports a Zacks Rank #1 (Strong Buy). Microchip (MCHP - Free Report) and Silicon Laboratories (SLAB - Free Report) are two other favourably placed stocks with the same Zacks Rank as ON Semi. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Microchip and Silicon Laboratories is pegged at 14.5%, and 12.5%, respectively compared with ON Semi’s 14.8%.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>