An independent two-stage DCF analysis by a frontier AI model.
ON Semiconductor is currently caught in the crosshairs of a brutal inventory correction across the automotive and industrial supply chains. The market has severely punished the stock as near-term growth has evaporated. However, this weakness presents a classic opportunity to acquire a high-quality asset during a cyclical trough. The company's strategic pivot toward intelligent power and sensing has fundamentally improved its gross margin profile and cash generation capabilities.
At current price levels near $59, the market is mispricing the long-term structural tailwinds of electrification. Even if EV adoption rates slow temporarily, the semiconductor content per vehicle is increasing exponentially. onsemi's massive investments in silicon carbide capacity ensure it will be a primary beneficiary when the cycle inevitably turns, offering a compelling margin of safety for patient investors.
A 9% growth rate assumes a recovery from the current cyclical trough. Once automotive and industrial inventory clears, the secular tailwinds of electrification and renewable energy should drive strong, compounding growth in high-margin power products.
A 10.5% discount rate is relatively high, reflecting the inherent cyclicality of the semiconductor industry and the specific execution risks associated with scaling complex silicon carbide manufacturing processes.
A 3.0% terminal growth rate assumes onsemi will grow slightly faster than historical global GDP, given the permanent structural increase in semiconductor content required for future energy and mobility platforms.
Intrinsic value per share under varying discount rate and terminal growth rate assumptions.
| WACC ↓ / Terminal → | 2.0% | 2.5% | 3.0% | 3.5% | 4.0% |
|---|---|---|---|---|---|
| 2.0% | $90.58 | $78.50 | $69.26 | $61.97 | $56.07 |
| 2.5% | $98.13 | $84.11 | $73.59 | $65.42 | $58.87 |
| 3.0% | $107.05 | $90.58 | $78.50 | $69.26 | $61.97 |
| 3.5% | $117.75 | $98.12 | $84.11 | $73.59 | $65.42 |
| 4.0% | $130.83 | $107.05 | $90.58 | $78.50 | $69.26 |
■ Undervalued vs current price ■ Overvalued vs current price
The decline is due to a broad inventory correction. Customers in the industrial and automotive sectors over-ordered during previous supply chain shortages and are currently burning off excess inventory before placing new orders.
SiC is a wide-bandgap semiconductor material that is far more efficient at handling high voltages than traditional silicon. It is critical for extending the range and reducing the charging time of electric vehicles.
No. The semiconductor industry is notoriously cyclical and capital intensive. The higher discount rate adequately penalizes the valuation for the risk of prolonged downturns and technological obsolescence.
Disclaimer: The numbers presented on this page are for educational and entertainment purposes only. They are the result of a deterministic mathematical model fed with assumptions generated by an Artificial Intelligence (Gemini 3.1). This does not constitute investment advice. Always conduct your own due diligence before investing in the stock market.