ON Semiconductor Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of ON Semiconductor (Nasdaq: ONNN  ) fell as much as 10% after analysts at UBS downgraded the stock, along with Microchip Technology (Nasdaq: MCHP  ) and Maxim Integrated Products (Nasdaq: MXIM  ) .

So what: All three stocks saw their ratings cut due to concerns over spending trends in the auto, PC, and consumer electronics markets, Forbes reports. ON, in particular, was cut from buy to neutral as UBS shaved its target price from $15 to $11 a share.

Now what: Should investors be concerned? Maybe, but with the sell-off the stocks now trades for a sharp discount to its long-term projected earnings growth rate, resulting in a 0.61 PEG ratio. My guess is whatever legit pessimism that exists has already been priced in. Do you agree? Disagree? Weigh in using the comments box below.

Interested in more info on ON Semiconductor?Add it to your watchlist.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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  • Report this Comment On July 13, 2011, at 12:02 AM, steveonyx wrote:

    ON Semiconductor really did not deserve the pounding that it took today. The company is doing well and with the integration of their relatively recent acquisitions, they are going to see expanding margins even if their sales growth is a little lower than expectations.

    I have some January 2013 options that were starting to look promising, but now I'll have to battle back a little bit before my profits roll in.

    Of course ONNN wasn't my only chip stock that was pounded today. You should check out Onyx Investing and see how we have been making money this year with our aggressive options purchases: http://onyxinvesting.com/trade-history/

    Thanks to Motley Fool for great articles like this one that point out the fundamental value of great companies like ONNN.

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