Why onsemi (ON) Shares Are Sliding Today

What Happened?

Shares of analog chips maker onsemi (NASDAQ:ON) fell 11.3% in the afternoon session after the company reported second-quarter financial results that showed shrinking profit margins and an earnings miss, overshadowing a revenue beat. The semiconductor manufacturer posted revenue of $1.47 billion, which topped analyst forecasts. However, the company’s adjusted earnings of $0.53 per share slightly missed Wall Street's consensus estimate. Investors seemed more worried about the company’s weakened profitability. On a quarterly basis, onsemi's gross margin fell by 2.4 percentage points to 37.6%. Sales also dropped more than 15% compared to the same quarter last year. While the company's outlook for the upcoming third quarter surpassed expectations, investors focused on the immediate pressure on margins.

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What Is The Market Telling Us

onsemi’s shares are very volatile and have had 29 moves greater than 5% over the last year. But moves this big are rare even for onsemi and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 12 days ago when the stock dropped 5% on the news that industry bellwether Texas Instruments signaled softer demand and issued a cautious outlook. Texas Instruments, a key chipmaker for various industries, sparked concern after it provided a weaker-than-expected forecast for the remainder of the year. Analysts on the company's earnings call noted a "tone shift" from executives regarding the semiconductor recovery cycle compared to previous quarters. The change in messaging from a major industry player created uncertainty about the health of the overall chip market. This cautious sentiment appeared to weigh on related stocks, as investors reassessed the sector's near-term growth prospects.

onsemi is down 18.7% since the beginning of the year, and at $50.19 per share, it is trading 35.6% below its 52-week high of $77.87 from August 2024. Investors who bought $1,000 worth of onsemi’s shares 5 years ago would now be looking at an investment worth $2,314.

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