- ON Semiconductor shares fell 21% Monday after the company offered weaker-than-expected guidance for its fourth quarter.
- The company said it expects revenue to fall between $1.95 billion and $2.05 billion, while Wall Street was expecting $2.18 billion.
- Analysts said Monday that investors should "remain cautious."
ON Semiconductor said it expects to report fourth-quarter earnings between $1.13 and $1.27 per share, excluding certain items, which is short of the $1.36 analysts had anticipated. Similarly, the company said revenue will come in between $1.95 billion and $2.05 billion, while Wall Street was expecting $2.18 billion.
Analysts at Deutsche Bank said ON Semiconductor's guidance suggests the company has "finally succumbed to macro pressures" such as softening demand for cars.
"Following this disappointing outlook, we are not surprised by today's stock move, as investors are likely wary of ON returning to its cyclical patterns of old," they wrote in a Monday note.
Even so, the analysts said they believe the company's structural improvements will yield better outcomes than it saw in past cycles. They maintained their buy rating on the stock.
Craig-Hallum analysts said they believe weakening demand for electric vehicles will adversely affect ON Semiconductor in the near term. They said it will be a "tougher year" for the company and investors should "remain cautious."
"We note near-term auto uncertainty, including the recently settled UAW strike, higher interest rates, and lowered demand for EVs, will likely negatively impact the next several quarters or much of 2024," they wrote Monday.
Analysts at Wolfe Research added that ON Semiconductor had managed to avoid weakness until now because of its noncancelable orders, long lead times and strength in auto, but that lingering challenges in the market means that will be "difficult to continue."
— CNBC's Michael Bloom contributed to this report.
Don't miss these CNBC PRO stories:
- Want to retire in 5 years? Here's how to invest for it, according to the pros
- Morgan Stanley says the average stock is breaking down, S&P 500 to fall to 3,900 by year-end
- This highly profitable industry is booming as the population ages
- This chip stock is getting a ton of love from Wall Street, and it's not Nvidia