ON Semiconductor Shares Drop 22% Following Lower Than Expected 4Q Projections Amid Slowing Electric Vehicle Demand

ON Semiconductor moves forward with job cuts, unsettling investors, as the chipmaker's projections show decreased earnings due to softened electric vehicle demand, increased risk due to higher interest rates, and potential impact from recent United Auto Workers strike.

ON Semiconductor's shares fell almost 22% as projections for the fourth quarter significantly underperformed analysts' expectations. The chipmaker predicted its fourth quarter revenue to be between $1.9 billion and $2 billion, compared to analysts' predictions of $2.18 billion.
The company's CEO, Hassane El-Khoury, denied direct impact from the United Auto Workers strike on the projection, although he warned of possible future repercussions. Instead, El-Khoury hinted at the influence of a 'single outlier customer' in affecting the quarterly earnings.
Deutsche Bank analysts believe ON Semiconductor has 'succumbed to macro pressures', referencing the softening demand for cars, particularly electric vehicles. Despite this, they maintain a buy rating on the stock, citing the company's structural improvements.
Craig-Hallum analysts also warned of near-term automotive uncertainties affecting ON Semiconductor, including the recent UAW strike, high interest rates, and a drop in demand for electric vehicles. This is predicted to negatively impact the company's performance in upcoming quarters or potentially much of 2024.
Despite the gloomy forecast, ON Semiconductor's third-quarter FY23 revenue reported a decrease of only 0.5% year-on-year to $2.18 billion, beating the consensus of $2.15 billion. The adjusted earnings per share of $1.39 also topped the consensus of $1.34.