On Semiconductor ON recently announced its agreement to acquire the Silicon Carbide Junction Field-Effect Transistor (SiC JFET) technology business, including the United Silicon Carbide subsidiary, from Qorvo QRVO for $115 million in cash. 

The acquisition from Qorvo enhances ON’s EliteSiC power portfolio, enabling the company to meet the growing demand for high energy efficiency and power density in AC-DC power supply units for AI data centers. 

The move also positions ON to accelerate its readiness for emerging applications such as electric vehicle (EV) battery disconnects and solid-state circuit breakers, leveraging the SiC JFET technology’s advantages in performance, development speed, and system cost reduction.

ON Benefits From Acquisitions and SiC Growth

The latest move bodes well for ON’s focus on enhancing its energy-efficient solutions by acquiring Qorvo’s SiC JFET business, which aligns with its broader strategy of advancing technology for sustainable energy solutions.

ON Semiconductor Corporation Price and Consensus

ON Semiconductor Corporation price-consensus-chart | ON Semiconductor Corporation Quote

In addition, On Semiconductor’s acquisition of GT Advanced Technologies has helped it meet the growing demand for Silicon carbide-based solutions, reinforcing its commitment to innovation in high-performance materials and systems that drive energy efficiency across industries.

Apart from strategic acquisitions, ON’s SiC solutions are also gaining traction in automotive and industrial applications. In the third quarter of 2024, the company saw sequential growth in silicon carbide revenues, driven by utility-scale solar and gains in China’s battery electric vehicles.

Expanding Clientele Aids ON’s Prospects

ON’s dominant position in silicon carbide has been a major factor in its strong partner base, which includes BorgWarner BWA, Volkswagen VWAGY and Magna International, thereby driving growth.

ON’s partnership with BorgWarner expands its collaboration for silicon carbide (SiC) technology, with a $1 billion lifetime value, integrating ON’s EliteSiC power devices into BorgWarner’s VIPER power modules to enhance EV efficiency and performance.

In July, the company announced a multi-year deal with Volkswagen Group to supply a complete power box solution featuring silicon carbide-based technologies for its next-generation traction inverter, enhancing EV efficiency and performance.

ON’s partnership with Magna involves a long-term supply agreement to integrate the company’s EliteSiC intelligent power solutions into Magna’s eDrive systems, enhancing EV efficiency, range, and production capacity.

ON’s Earnings Estimate Revision Shows Downward Trend

ON is benefiting from its expanding portfolio, acquisitions 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.

The stock is down 20.6% against the Zacks Computer & Technology sector’s return of 32.4% year to date.

The Zacks Consensus Estimate for fourth-quarter 2024 earnings is currently pegged at 99 cents per share, unchanged in 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, unchanged in the past 30 days. The metric indicates a 22.48% decline year over year.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

ON’s Shares: Buy, Sell or Hold?

Despite a broadening portfolio across diverse end markets, ongoing macroeconomic uncertainty and frequent buyouts increase integration risk, which have been affecting ON’s prospects.

We point out that ON stock is not so cheap, as the Value Score of C suggests a stretched valuation at this moment.

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

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