We’re about to see a deluge of strong September quarter earnings reports, but everyone is positioned for pain. So, let’s ask: What if nothing breaks? Meanwhile, I still like ON Semiconductor Corp. (ON), advises Michael Murphy, editor of New World Investor.
Goldman’s clients have largely moved into protection mode with their chips off the table into year-end. Non-dealers have sold $63.7 billion of S&P futures over the past six weeks, selling in five of those six weeks. The latest week added another $10.5 billion of selling, with asset managers responsible for $11.7 billion.
ON Semiconductor Corp. (ON)
But the real pain trade may be to the upside. The market hasn’t collapsed, and a lot of exposure has already left the building. If the macro backdrop simply stops getting worse, earnings could become the clearing event for an extremely defensive market.
As for ON Semi, it apparently was competing with Cirrus Logic Inc. (CRUS) to acquire Synaptics Inc. (SYNA) in September. ON agreed to acquire Synaptics for $123 per share in an all-cash deal worth roughly $5.7 billion, revising its previous all-stock bid in June worth about $7 billion.
StoneX initiated coverage of ON with a “Buy” rating and a $110 target, saying the company will benefit from a recovery in semiconductor demand and growth in automotive and AI data center power systems. The firm's $110 target is based on 16x its fiscal 2028 pro forma earnings estimate, including an expected 5%-10% contribution from Synaptics to earnings per share.
Recommended Action: Buy ON.