ON Semiconductor (ON) Q2 earnings showed a "muted" sales recovery, particularly in industrial sales and a continued weakness in the US and European auto markets, BofA Securities said in a report Tuesday.
The report noted that ON's Q2 earnings "painted a picture of muted sales recovery, including a miss in industrial sales and ongoing exits from non-core segments." The company also saw "continued weakness in US/European auto" and "limited/no [gross margin] recovery for several quarters," the report said.
BofA downgraded the company's stock to neutral from buy and lowered the price target to $56 from $70, the report said.
While the company "offers the most [earnings per share] leverage in the industry and is executing on an interesting data center opportunity," the "recovery timing and data center growth isn't likely to shine until 2H of next year leaving the stock potentially range-bound."
Analysts at BofA also highlighted positive aspects, including strong free cash flow and a "data center opportunity" where sales have "nearly doubled YoY in Q2." However, these are balanced by risks such as "uncertainty around tariffs and auto/EV production" and "slower GM recovery."
Price: 47.57, Change: -0.40, Percent Change: -0.84
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.