Barclays initiated coverage of ON Semiconductor (NASDAQ: ON) with an Equalweight rating and set a $75.00 price target, a figure that sits near the stock's prevailing market price. ON was trading around $73.22 at the time Barclays published its view, having climbed 12.81% over the prior week and trading marginally above InvestingPro's Fair Value estimate.
In its initiation note, Barclays emphasized ON's stronger correlation with Purchasing Managers' Indexes relative to peers and highlighted the strategic importance of the company's manufacturing ownership. The research team pointed to historical patterns in which ON tended to outperform the S&P 500 by 7% over three-month stretches and by 19% over twelve months when PMIs moved above the 50 threshold.
Barclays outlined a set of discrete gross margin tailwinds that could support profitability. The bank quantified potential upside of:
- 700 basis points from higher utilization;
- 200 basis points from Fab Right initiatives;
- 200 basis points from potential fab divestitures; and
- 200 basis points from the contribution of new products.
These potential improvements sit against ON's current gross profit margin of 38.32%. Barclays' initiation also referenced InvestingPro data showing that 15 analysts recently raised their earnings estimates for the upcoming period.
Barclays acknowledged material risk concentrations in ON's profile. The company derives roughly 50% of its exposure from Asia excluding Japan and approximately 50% from the automotive end market. That mix creates pressure on ON's shares, particularly in the Chinese electric vehicle market, a factor Barclays said investors already appreciate.
Revenue trends remain a concern. ON's most recently reported revenue fell 15.35% year over year in the period cited by Barclays, though forecasts embedded in the initiation anticipate a rebound to about 5% revenue growth in the coming fiscal year.
Inventory dynamics were a notable focal point. Barclays reported inventories near 192 days on hand but explained that this total includes roughly 76 days classified as bridge inventory tied to silicon carbide fab transitions. Excluding that bridge inventory yields base inventories of about 116 days, which Barclays contrasted with the company's target range of 100 to 120 days. The initiation also noted a robust current ratio of 4.52, indicating that ON's liquid assets exceed short-term liabilities and providing added flexibility through the transition period.
Barclays pointed readers seeking more detailed financial metrics to the Pro Research Report on InvestingPro for additional analysis.
Barclays' initiation follows a recent set of quarterly disclosures and analyst reactions. ON reported fourth-quarter 2025 revenue of $1.53 billion, a sequential decline of 1.3% and an 11.2% drop from the year-ago quarter. The company's overall reported revenue of $3.015 billion missed the consensus estimate of $3.070 billion, but the automotive and industrial segments exceeded expectations. The industrial business, in particular, posted year-over-year growth for the first time in eight quarters.
Market reactions from other brokerages have varied. Stifel and Cantor Fitzgerald both maintained Hold and Neutral ratings respectively and used a $60 price target. Truist Securities increased its price target to $66, citing margin improvement that helped offset modest revenue shortfalls. Piper Sandler and KeyBanc each raised their price targets to $75 and kept Overweight ratings. Piper Sandler also called out exits from non-core business lines totaling $40 million in the fourth quarter, with an anticipated $50 million of similar exits in the first quarter of 2026. KeyBanc described those exits as offsetting signs of a cyclical recovery in the semiconductor market.
Taken together, Barclays' initiation underscores a mix of operational levers that could improve margins and balance-sheet metrics that provide near-term resilience, while noting revenue softness and geographic and end-market concentrations as continuing sources of investor concern.