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Shares of On Semiconductor fall 20% on bad Q4 guidance

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Shares of ON Semiconductor tumbled 20% Monday after the company’s third-quarter report beat expectations but offered weak guidance for the rest of the year.

ON Semiconductor said it expects to report fourth-quarter earnings between $1.13 and $1.27 per share, excluding certain items, which is short of the $1.36 analysts had anticipated. Similarly, the company said revenue will come in between $1.95 billion and $2.05 billion, while Wall Street was expecting $2.18 billion.

Analysts at Deutsche Bank said ON Semiconductor’s guidance suggests the company has “finally succumbed to macro pressures” such as softening demand for cars.

“Following this disappointing outlook, we are not surprised by today’s stock move, as investors are likely wary of ON returning to its cyclical patterns of old,” they wrote in a Monday note.

Even so, the analysts said they believe the company’s structural improvements will yield better outcomes than it saw in past cycles. They maintained their buy rating on the stock.

Craig-Hallum analysts said they believe weakening demand for electric vehicles will adversely affect ON Semiconductor in the near term. They said it will be a “tougher year” for the company and investors should “remain cautious.”

“We note near-term auto uncertainty, including the recently settled UAW strike, higher interest rates, and lowered demand for EVs, will likely negatively impact the next several quarters or much of 2024,” they wrote Monday.

Analysts at Wolfe Research added that ON Semiconductor had managed to avoid weakness until now because of its noncancelable orders, long lead times and strength in auto, but that lingering challenges in the market means that will be “difficult to continue.”

— CNBC’s Michael Bloom contributed to this report.

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