ON Semiconductor: Reset Setting Stage for Rebound

Markets aren't known for patience, but ON Sem is calling my bluff. Today, Wall Street is single-

mindedly focused on a fading FY25 outlook: headline EPS set to contract nearly 32% as under-absorbed capacity margins waterfall 900bp lower. With that, hot money has fled and the trigger happy crowd is tap dancing on the sell button. Here's my contrarian take: under the hood, ON is quietly setting up the mother of all factory resets... one that primes the earnings lever for a rebound as utilization resets and SiC inflects. In my view, it's what comes after that counts, not the transition quarters ahead. ON Sem is hardly an unknown – its advanced power management and sensing ICs enable the next generation of EVs, datacenter AI, solar, and industrial use cases across the globe. The business sits at the crossroads of compelling secular trends and is a genuine technology enabler for the electrification megatrend. But if ON is new to you, I caution – don't be fooled by the "semiconductor" tag. ON's exposure is less cyclical consumer and more irreplaceable infrastructure. I reiterate my Hold rating on ON Sem and set a $60 PT using 19x FY26E P/E on my $3.18 EPS. That's just ~11% upside – hardly cause for a table pounding. My conviction hinges on the fact that while headwinds persist near-term, ON's cost and mix reset should result in leverage as utilization recovers. On my model, SiC adoption (esp. in China EVs) and UPS (guiding 40-50% growth in 2025)