Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Here's Why You Should Get Rid Of ON Semiconductor Stock Now

Published 01/02/2019, 07:42 AM
Updated 07/09/2023, 06:31 AM

If you are still holding on to shares of ON Semiconductor Corporation (NASDAQ:ON) in your portfolio, it is time you dump them as chances of favorable returns in the near term appear bleak.

Dropping ON Semiconductor can maximize investor’s portfolio returns as it has witnessed a significant price decline in the past one year. Further, the company’s Zacks Rank #4 (Sell) only highlights its innate weakness.

The company’s shareshave lost 27.5% of its value year over year compared with the industry’s decline of 20%.

Let’s delve deeper and analyze the factors dragging the company down.

Why Should You Avoid ON Semiconductor?

ON Semiconductor is an original equipment manufacturer (OEM) of a broad range of discrete and embedded semiconductor components. The company has significant debt burden. The company exited the third quarter with total debt (long-term plus short term) amounting to $2.71 billion. Net debt at the end of the quarter amounted to $1.76 billion. A high debt position increases the risk profile of the business.

The company faces significant competition in all of the served markets. Being a maker of building block components of a general purpose nature, competition comes from every kind of integrated circuit manufacturer.

However, ON Semiconductor’s restructuring actions are likely to have a positive impact on margins over the next year or so. Further, its recent acquisitions have increased its exposure to industrial, automotive and consumer markets that have helped it diversify from a sluggish computing market. Nevertheless, the company is considering cutting down utilization, as broader markets are witnessing weaker demand trends. This will invariably lead to poorer fixed cost absorption, in turn eroding margins.

Stocks to Consider

Some better-ranked stocks in the broader technology sector are Upland Software (NASDAQ:UPLD) , Marvell Technology Group Ltd. (NASDAQ:MRVL) and Infineon Technologies AG (OTC:IFNNY) , all flaunting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for Upland Software, Marvell and Infineon Technologies is currently pegged at 20%, 9.4% and 8.6%, respectively.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>



Upland Software, Inc. (UPLD): Free Stock Analysis Report

Marvell Technology Group Ltd. (MRVL): Free Stock Analysis Report

Infineon Technologies AG (IFNNY): Free Stock Analysis Report

ON Semiconductor Corporation (ON): Free Stock Analysis Report

Original post

Zacks Investment Research

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.