ON Semiconductor Corp (NASDAQ:ON) stock is up 6.4% at $85.22 this morning, after the chipmaker and Synaptics (SYNA) revised their merger agreement following an unsolicited competing proposal for Synaptics. Under the revised terms, Onsemi will acquire Synaptics for $123 per share in cash, valuing the deal at roughly $5.7 billion, down from approximately $7 billion under the previous agreement. The transaction is expected to be immediately accretive to Onsemi's non-GAAP earnings per share.
ON has been rebounding since its mid September five-month lows, now on track for its fourth-straight gain. The 150-day moving average, which kept a firm lid on gains in August, lingers just above, however. Year to date, the equity is up 58.9%.
Short interest could provide additional fuel. The 29.55 million shares sold short account for 7.6% of ON's available float, or nearly three days' worth of pent-up buying power.
Analysts are leaning slightly bullish on the semiconductor stock. Of the 29 brokerages in coverage, 17 carry a "buy" or better rating, compared to 12 "hold" recommendations and not a single "sell." Stifel reiterated its "hold" rating after the news today, but did cut its price target to $75 from $90.
Options traders have favored calls. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and Nasdaq OMX PHLX (PHLX), ON's 50-day call/put volume ratio of 4.72 ranks in the 96th percentile of its annual range, indicating calls have been picked up at a faster-than-usual clip.
It's also worth noting that ON's Schaeffer's Volatility Index (SVI) of 55% ranks in the 28th percentile of its annual range, suggesting options traders are pricing in relatively low volatility expectations at the moment. The stock's Schaeffer's Volatility Scorecard (SVS) sits at 89 out of 100, indicating the equity has tended to exceed options traders' volatility expectations during the past year.
