UPDATE: ON Semiconductor (ON) PT Raised to $45 at Deutsche Bank
Deutsche Bank analyst Ross Seymore raised the price target on ON Semiconductor (NASDAQ: ON) to $45.00 (from $40.00) while maintaining a Buy rating.
The analyst comments "ON posted a strong 4Q20/1Q21 report/guide, as the co (like peers) is benefitting from the sharp improvement in semis demand across nearly every end market. More importantly, new CEO Hassane El-Khoury laid out some of his strategic philosophies regarding the transformation at ON (albeit with specific targets not being given until the co's upcoming Analyst day on August 5, 2021). It is clear that improving gross margins and overall profitability will be the initial focus of the company, with the co likely to continue (if not accelerate) manufacturing footprint rationalization, as well as execute a strict product-by-product profitability review and reexamine the allocation of R&D resources. We expect this product-line profitability review to be a nearer-term GM tailwind than many had assumed, albeit with it also being an incremental headwind to revenue as the co exits products that carry sub-par margins. Consequently, our CY21E revenue growth is increasing (+13% y/y vs +10% prior), but this outlook assumes a few points of conservatism to reflect the potential revenue headwinds from the co’s GM-enhancing changes. Overall, we remain bullish on further upside potential in ON’s shares as the company should benefit from the sector-wide cyclical rebound in demand, secular content gains in areas like Automotive, and, most importantly a potentially faster than expected improvement in GMs."