Technology Stocks

ON Semiconductor Corp (NASDAQ:ON) Bottoms Out On Stellar Earnings And $1.5 Billion Repurchase Program

The announcement of stellar Q3 financial results appears to have revitalized ON Semiconductor Corp (NASDAQ:ON) prospects in the market. The stock has bottomed out from this year’s lower lows with the upward momentum-gaining pace by the day. The announcement of a $1 billion stock repurchase program is another catalyst fuelling the upward momentum.

ON Semiconductor Price Analysis

ON Semiconductor came under immense short selling pressure on rallying to 52-week highs of $27 a share in the first half of the year. The stock consequently plunged to lows of $15 a share from where it has since bounced back and trying to make a comeback, back to the top.

A breach of the $18 a share resistance level has once again reaffirmed the emerging uptrend as bulls continue to win the fight against short sellers. With the upward momentum-gaining pace, ON Semiconductor looks set to make a run for the $21 a share level.


Above the $21, a share level, the stock would be bullish and could make a run for this year’s higher highs. On the downside, the stock faces immediate support at the $15 a share level, below which it remains vulnerable to further declines on the continuation of the long-term bear trend.

However, the stock remains well positioned to continue climbing high as investors continue to take note of a string of positive developments. The announcement of a $1.5 billion share repurchase program is a development that appears to have excited investors triggering the recent Bull Run.

$1.5 Stock Repurchase

Under the new repurchase program, the semiconductor company is to purchase $1.5 billion worth of shares over a period of four years. The new program replaces a previous $1 billion share repurchase program that started in December of 2014 and expired on December 1, 2018.

With the share repurchase program, the company has once again reiterated its commitment to returning maximum value back to shareholders.

“With strong momentum in industrial, automotive, and cloud power markets, ON Semiconductor is positioned to deliver results over the next four years that we expect will allow us to continue to invest in the business and return capital to shareholders,” said CEO Keith Johnson.

According to the CEO, the new $1.5 billion repurchase program underscores ON Semiconductor long-term free cash flow generation ability and commitment to returning value to shareholders.

The repurchase program is not the only development that is strengthening investor confidence in ON Semiconductor. The confirmation that the company has attained $1 billion in distribution resale is another achievement that continues to excite investors.

The resale milestone comes just days after the company posted stellar financial results for Q3. The company delivered non-GAAP earnings of 57 cents a share beating consensus estimates by 7 cents representing a 30% year over year increase.

Revenues, on the other hand, were up 11% to $1.54 billion topping consensus estimates of $1.51 billion the figure also topped a guidance range of between $1.49 million and $1.53 billion. ON Semiconductor attributes revenue growth to robust demand as well as increased adoption and favorable product mix of the diversified product portfolio.

Bottom Line

ON Semiconductors is the subject of renewed investor interest on reiterating its commitment to returning shareholder value with a massive repurchase program. The posting of stellar financial results is another development that has strengthened the stock’s sentiments in the market fuelling the recent uptrend.

Recent developments have already caught the attention of analysts at Needham & Co who have initiated coverage of the stock with a buy rating. The analysts expect the stock to make a run for the $22 a share level, given the strength of the upward momentum.

ON Semiconductor is an ideal play for investors looking to gain exposure in the chip production business. A steep pull back from this year’s highs means there is a lot of room to run to on the upside that one can take advantage of as the stock continues to bottom out.

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