ON Semiconductor ON recently announced that it will serve as the primary supplier of image sensors for Subaru’s next-generation EyeSight stereo-camera front sensing system. The new image sensor (Hyperlux AR0823AT) will be featured in future vehicle models.

The Hyperlux AR0823AT captures clear images in any lighting and ensures both EyeSight stereo camera sensors work synchronously.

ON’s Hyperlux AR0823AT sensor will act as the "eyes" for Subaru's AI-powered camera system, helping drivers make safer decisions. It also includes safety features that meet ASIL C standards, ensuring reliability for the driver assistance system.

ON provides innovative power and sensing technologies that solve complex challenges. Its selection as the primary supplier of image sensors for Subaru's next-generation EyeSight AI system is a significant development that bodes well for its prospects.

The deal with Subaru enhances ON's position in the rapidly growing automotive AI sector, especially in safety features like autonomous driving. The Hyperlux AR0823AT sensor, integrated into Subaru's EyeSight system, offers advanced capabilities, thereby ensuring better image capture for enhanced AI-driven decision-making and overall safety.

Subaru's commitment to AI-driven safety systems suggests a strong demand for ON's sensors, which is likely to drive higher revenues in the future. This aligns with Subaru's target of achieving "zero fatal road accidents” by 2030.

ON’s Shares Lag Sector and Industry

ON’s shares have lost 20.4% in the year-to-date (YTD) period, underperforming the broader Zacks Computer & Technology sector’s 25.7% rise and the Zacks Semiconductor - Analog and Mixed industry’s 8.2% decline.

However, it has outperformed its industry peers, including Microchip MCHP, MaxLinear MXL and Magnachip Semiconductor (MX). Over the same time frame, shares of Microchip, MaxLinear and Magnachip have lost 27.6%, 40.8% and 50.3%, respectively.

ON is benefiting from an expanding portfolio and strong partner base. However, challenges remain, with overall demand subdued due to ongoing inventory digestion and slow end-market demand, particularly in North America and Europe, which is expected to hurt its top-line growth.

ON’s Earnings Estimate Revision Shows Downward Trend

The Zacks Consensus Estimate for fourth-quarter 2024 earnings is currently pegged at 99 cents per share, down by a couple of pence over the past 30 days. The estimate indicates a year-over-year decline of 20.8%.

The consensus mark for fourth-quarter revenues is pegged at $1.76 billion, indicating a year-over-year decline of 12.73%.

For 2024, the Zacks Consensus Estimate for revenues is pegged at $7.12 billion, indicating a year-over-year decline of 13.70%. 

The consensus mark for earnings is pegged at $4 per share, down by a penny over the past 30 days. The metric indicates a 22.48% decline from 2023

Can a Strong Portfolio Provide a Boost to ON’s Shares?

ON’s expanding portfolio is a key catalyst. It is expanding its reach into high-efficiency power and sensing solutions with the introduction of the Treo Platform, which is an advanced analog and mixed-signal platform based on the Bipolar-CMOS-DMOS process technology at the 65nm node.

This versatile platform is designed to support a wide array of applications across automotive, industrial, healthcare, and data center markets, where energy efficiency and high performance are increasingly essential. 

The Treo Platform enables customers to streamline product development with its scalable, modular architecture and wide voltage range (1-90V), which allow rapid, customizable solutions.

In June, ON Semiconductor introduced its latest generation T10 PowerTrench family and EliteSiC 650V MOSFETs, offering unparalleled energy efficiency and high thermal performance for data centers, thereby potentially reducing global energy consumption by 10 TWh annually.

In July, ON Semiconductor introduced its EliteSiC M3e MOSFETs, a next-generation silicon carbide technology platform designed to enhance the performance and reliability of electrification initiatives, while reducing carbon emissions and supporting the transition to renewable energy resources.

ON’s SiC solutions are gaining traction in automotive and industrial applications. 

However, the sluggish near-term prospect is expected to hurt ON’s shares. Its Value Score of C indicates a stretched valuation.

ON currently carries a Zacks Rank #3 (Hold), which implies investors should wait for a more favorable entry point to accumulate the stock. You can find the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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