Shares of ON Semiconductor (ON 2.64%) are up 53% since I singled it out for 2026 and 31% year to date. All of which means nothing now, because all investors really care about is where the stock is heading next.
Peddling past performance wins no prizes. Still, despite the soaring share price, I think there's substantial value in the stock, and it's not too late to buy in.
ON Semiconductor passes an inflection point
The company's power and sensing chips make it a play on electrification and automation, and it has increased its focus on silicon carbide (SiC) and gallium nitride (GaN) chips, where it already has a leadership position. SiC chips can operate at very high temperatures and high voltage, making them ideal for use in electric vehicles (EVs), renewable energy, EV chargers, and industrial motors. GaN chips operate at high switching speeds without losing energy and are ideal for AI data centers, EVs, and aerospace and defense applications.
Image source: Getty Images.
Unfortunately, many of those end markets have been challenged in recent years as investments in EVs and renewable energy have been slower than expected. And the U.S. industrial sector has been weak since the end of 2022.
That's reflected in the chart below, which shows the company's sales by end market. However, if you look closely, you will see that both its automotive and industrial sales grew sequentially over the last two quarters, and its industrial revenue finally returned to year-over-year growth.
Management's guidance for the first quarter of 2026 calls for revenue of $1.435 billion to $1.535 billion, which, as chief financial officer Thad Trent noted on the earnings call, would "mark the first quarter with expected year-over-year growth since the downturn started over three years ago." It confirms the potential identified a few months ago.
Source: ON Semiconductor; chart by author.
CEO Hassane El-Khoury said that there are "clear signs of improvement across automotive, industrial, and AI infrastructure," suggesting that the company has indeed passed an inflection point. Consequently, Wall Street analysts are pricing in 4.8% revenue growth for 2026, leading to 24% earnings-per-share growth.
A good value stock
The company generates cash at a high rate. It 2025, it produced $1.4 billion in free cash flow (FCF), roughtly equivalent to 4.9% of its currentmarket cap. Analyst estimates project OnSemi will convert at least 25% of revenue converted into FCF in 2026. Based on these projections, OnSemi's stock trades at a forward price-to-FCF multiple of 18.1. That's a very low multiple for a growth stock. In addition, the company has a three-year $6 billion share-repurchase program, which began in January.
Risks and opportunities
The company's exposure to Chinese EVs is a concern. But it has growth opportunities from AI data centers (which accounted for a fast-growing $250 million of its $6 billion revenue in 2025), a long-overdue bounce in the industrial sector, and stabilization in EV spending.
The valuation remains attractive, and despite a substantial rise in price, there's still plenty of upside for the stock, backed by a $6 billion buyback program for a company with a $28.4 billion market cap.
