ON Semiconductor (ON) PT Raised to $26 but Morgan Stanley Keeps Underweight Rating

Morgan Stanley analyst Craig Hettenbach raised the price target on ON Semiconductor (NASDAQ: ON) to $26.00 (from $24.00) while maintaining a Underweight rating after the company reported strong results due to a cyclical rebound in the business, led by strength in autos.

The analyst stated "CY21/CY22 goes to $1.56/$1.86 up from $1.26/$1.69. By end market, we model the strongest growth in autos (up 21% y/y in 2021) and industrial (+14%). Our target multiple of 14X P/E represents a 20%-25% premium to ON’s historic multiple of ~11.5X, giving the company some credit for the opportunity to improve margins and reflecting multiple expansion across the group. The magnitude of gross margin expansion, and most importantly any signs of structural improvement, is likely to be the biggest swing factor in the multiple from here".

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