American chipmaker On Semiconductor may see its stock increase by over 25% in the near future, as forecasted by Bank of America, TradeAlgo reports.
Bank of America Securities Analyst Vivek Arya was named On its first autos pick. According to the report, Arya upheld a buy rating on the company this week after what he called a “confident” management pitch.
“This win is in addition to ON’s other notable wins at Tesla, Mercedes, Jaguar Land Rover, VW, Hyundai, and Nio. On and several other peers, including TXN, MCHP, and WOLF, have affirmed that auto semis remain one of the bright spots of the industry despite macro headwinds impacting consumer and computing markets.”
Vivek Arya, Bank of America Securities Analyst
Notably, it will not be surprising if the chipmaker actually sees its stock increase considering its latest long-term partnership with German auto giant BMW.
On Semiconductor’s stock continues to increase
The American semiconductor supplier managed to increase its stocks by almost 26% in 2023. The improvement came a year after the company delivered strong results in 2022, even though its share price declined by 8% then.
However, its shares may increase by approximately 27% from Tuesday’s closing if the bank analyst’s price target is increased from $90.
The report said the stock price rose by almost 0.4% in Wednesday’s pre-market trade.
Arya explains that the battery electric vehicle uptake and the necessary charging infrastructures drive demand for semiconductors, enabling further growth for the auto sector.
“Our expectation is that ON will maintain/expand its 25-30% share of the SiC device market in CY23E, as well as benefit from its leadership position in image sensors for advanced driver assistance systems.”
Vivek Arya, Bank of America Securities Analyst
Moreover, Arya learned about Tesla’s engineering head Colin Campbell’s announcement at the Investor Day event to decrease silicon carbide (SiC) transistors usage in the automaker’s next-gen powertrains. In essence, these remarks caused chipmakers’ stocks, especially On Semiconductor, to decline.
Nonetheless, the analyst noted that the announcement focuses on lower-end models. The analyst further argues that a faster EV uptake would mitigate a potential setback.
