Yesterday, $ON Semiconductor(ON)$, automotive chip giant, released third-quarter results. Although revenue and profit exceeded expectations, the performance guidance was poor, and the stock price plummeted 21.77%.
ON Semiconductor has been ahead of the pack, standing proudly at the bow when the semiconductor giant's share price collapsed, hitting an all-time high three months ago.
The key to standing out is the explosion of the automotive chip business of ON Semiconductor, especially the boom of the new energy vehicle market, which makes it make a lot of money. However, the third-quarter result was a wake-up call for ON Semiconductor.
Specifically, revenue of ON Semiconductor in the third quarter was $2.18 billion, down 0.5% year-on-year, exceeding analyst expectations of $2.147 billion, and approaching the upper limit of the guidance:
Third-quarter gross margin was 47.26%, beating analysts' expectations of 47.02% and beating the median guidance:
In terms of terminals, revenue from the automobile business in the third quarter was $1.158 billion, an increase of 32.5% from the same period last year; revenue from the industrial market was $616 million, an increase of 0.4%; and revenue from other businesses was $407 million, down 42.3% from the same period last year:
Judging from the third quarterly report, ON Semiconductor's performance was bright, but the performance guidance fell, among which:
Revenue in the fourth quarter is expected to be between $1.95 billion and $2.05 billion, a median decline of 4.9% compared with the previous three quarters, and the decline is wider. Analysts had expected $2.18 billion;
Fourth-quarter gross margin is expected to be between 45.4% and 47.4%, while analysts expect 47.1%.
In terms of business, management expects automotive revenue to decline mid-single digits sequentially, with larger declines in industrial and other markets.
ON Semiconductor's automotive business, which makes up 53% of the company, had been growing at a rapid pace, making its share price unique. Now, investors were surprised by news of a quarter-on-quarter decline.
In addition to the headwinds facing the fourth quarter, management also warned that the decline in automotive demand could continue into the first half of 2024. As for industrial and other businesses, management is also not hopeful for 2024 due to the weak European economy.
Even the fast-growing silicon carbide business, which had forecast $1 billion in revenue in 2023, was hit by a $200 million revenue cut in the third quarter due to a customer order problem.
In both cars and industry, the main reason behind the decline in demand is that high interest rates brought about by high inflation in Europe and the United States suppressed the corresponding demand, and because ON Semiconductor's previous share price failed to reflect the bad news, so when the adverse situation suddenly appeared in front of investors, the market panicked.
But as management has said, the electrification of vehicles is still a long-term trend. After the short-term shock, the market's prospects are still wonderful.
At present, ON Semiconductor's price-to-book ratio is 3.8 times, falling back to 2021. If it continues to decline, it may open the upward space:
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