ON Downgraded
TD Cowen downgrades ON to Hold from Buy, lowers price target to $110 from $115 following announced plans to acquire Synaptics
ON TD Cowen Downgrades ON to Hold from Buy, Lowers PT to $110 from $115 Analyst comments: "We downgrade ON to Hold following its announced plans to acquire Synaptics.
We believe in the organic auto/data center growth and capital return story, but think the deal adds complexity to an already complicated model reliant on loadings to drive EPS.
Shares are up more than 100% YTD and, at ~25x our 2027E, we think shares are fairly valued.
We look forward to the September Analyst Day for more details on onsemi's long-term vision.
We have long been believers in onsemi's competitive positioning and opportunity in the automotive/xEV and data center markets as pillars of its HSD% target growth model.
Acknowledging Synaptics' growing edge AI/robotics business, we see the deal as a distraction for onsemi investors, muddying the narrative given Synaptics' considerable exposure to consumer and wireless markets.
We think onsemi's lack of MCU/SoC processing expertise has been a gap in the portfolio versus peers, but we worry Synaptics' NPU processors, largely targeting edge and embedded AI applications, may be too niche of an asset to serve as onsemi's beachhead to compete with tenured diversified players that are not sitting idly." Analyst: Joshua Buchalter