BofA Elevates ON Semiconductor (ON) Stock to Buy With $85 Target Amid AI Growth

Key Highlights

Table of Contents

BofA Securities elevated ON Semiconductor to Buy from Neutral, increasing the price target to $85 from $70.
Key catalysts include the company’s AI power infrastructure pipeline, Treo product momentum, and a three-year $6 billion share repurchase plan.
Analysts project pro forma earnings and free cash flow could reach $6–$7 per share by 2028, approximately double today’s levels.
Shares have surged 96% over the trailing twelve months, currently trading at $68.65, approaching the 52-week peak of $73.76.
Investment firm Iridian Asset Management expanded its position by 45.8% during Q4, while company executives divested roughly $6.09 million in shares last quarter.

ON Semiconductor ($ON) kicked off the week with renewed investor enthusiasm following BofA Securities’ decision to upgrade the chipmaker to Buy from Neutral, while simultaneously raising its price objective to $85 from $70.

ON Semiconductor Corporation, ON

Analyst Vivek Arya from BofA highlighted several catalysts driving the optimistic outlook: the semiconductor company’s expanding artificial intelligence power infrastructure business, momentum in its Treo product portfolio, and an attractive free cash flow yield hovering around 6%. Additionally, management’s pledge to distribute nearly all free cash flow through a $6 billion share repurchase initiative spanning three years reinforced the bullish thesis.

Shares commenced trading Monday at $68.65, hovering near the 52-week pinnacle of $73.76. The stock has generated impressive 96% returns over the past twelve months — representing a remarkable reversal from the prior three-year period when shares declined 36% while the SOX semiconductor index advanced 132%.

This transformation reflects intentional strategic moves. Company leadership addressed earlier underperformance through portfolio rationalization, operational expense reduction, and a sharpened emphasis on cash flow generation.

Financial Projections and Stock Valuation

BofA increased its earnings forecasts for 2026 and 2027 by 2% and 7% respectively. The revised $85 price objective applies a 21x multiple to 2027 earnings estimates, up from the previous 18x valuation, acknowledging enhanced growth prospects. The investment bank anticipates earnings expansion of 26% in 2026 and 40% in 2027.

Extending the timeline, BofA envisions pro forma earnings per share and free cash flow approaching $6–$7 by 2028, representing approximately double current performance metrics. The firm identified the company’s September analyst day as a potentially significant positive catalyst.

In its latest quarterly filing, ON delivered earnings of $0.64 per share, exceeding Wall Street expectations by $0.02. Revenue totaled $1.53 billion, marginally below the $1.54 billion consensus estimate. That revenue figure represented an 11.2% year-over-year decline. Management provided Q1 2026 earnings guidance between $0.56 and $0.66 per share.

The stock currently trades at a trailing price-to-earnings multiple of approximately 202, which remains notably elevated. The analyst community maintains an average price target of $64.19 with an overall Hold consensus: 12 Buy recommendations, 17 Hold ratings, and 1 Sell rating.

Institutional Accumulation Versus Executive Divestments

Among institutional investors, Iridian Asset Management significantly increased its ON position by 45.8% during the fourth quarter, acquiring 28,778 additional shares to reach a total holding of 91,632 shares, representing approximately $4.96 million in value. Multiple other institutional funds similarly expanded their stakes during the period. Institutional ownership now comprises roughly 97.7% of outstanding shares.

Executive transactions told a contrasting story. Chief Financial Officer Trent Thad divested 60,000 shares at $71.22 during February, trimming his holdings by 15%. Insider Sudhir Gopalswamy sold 6,114 shares at $58.67 in March. Collectively, company insiders sold approximately 86,114 shares valued at roughly $6.09 million throughout the most recent quarter.

Semiconductor industry lead times have been extending across multiple product categories. Analysis from Baird indicated MOSFET lead times averaging 25 weeks, suggesting an accelerating semiconductor industry upcycle — a development that could provide tailwinds for ON’s operations in upcoming quarters.

Simon Keeton, Group President of the Power Solutions Group, plans to resign effective June 30, 2026, with leadership transition arrangements underway.

✨ Limited Time Offer