Seeking Alpha Touts ON Semiconductor as Bargain, But DeepValue Advises Patience Amid Execution Risks

What happened

A Seeking Alpha article from February 12, 2026, argues that ON Semiconductor remains a buy opportunity, citing its Treo platform, GaN offerings, and improving quarterly performance as tailwinds in the electrification and cloud supercycle. The article points to management's sequentially better FQ4'25 results, promising FQ1'26 guidance, and reiterated long-term targets, with a projected FY2028 EPS of $5.70 suggesting a 34.3% CAGR. However, the latest DeepValue master report maintains a 'WAIT' rating, highlighting that ON trades at a rich ~77x trailing P/E and ~10x EV/EBITDA despite depressed earnings and limited margin of safety. Critical issues include a non-GAAP gross margin stuck at 38% in Q3 2025, auto revenue only slowly recovering from a trough, and ongoing manufacturing restructuring with ~2,400 job cuts, signaling a structural reset rather than a swift rebound. While market sentiment may be shifting towards optimism, the fundamental recovery remains unproven, with execution risks around SiC expansions and aggressive $6 billion buybacks outweighing near-term bullishness.

Implication

The bullish article overlooks the deep cyclical trough and structural manufacturing reset detailed in SEC filings, where ON's gross margin of 38% in Q3 2025 falls far short of its 53% 2027 target, indicating significant operational challenges. ON's aggressive $6 billion buyback plan, while a confidence signal, risks straining finances if not fully funded by robust free cash flow amid ongoing underutilization and potential LTSA amendments. Key monitoring points over the next 6-12 months include auto revenue sustaining growth from the Q2 2025 trough and gross margin moving sustainably into the low-40s to validate recovery assumptions. Without these improvements, the current price near $60 offers limited margin of safety, with downside risk to $50 in bear scenarios and upside capped until execution improves. A disciplined approach favors waiting for a correction to the $50 attractive entry level or clearer evidence of margin expansion and balanced capital allocation before considering a position.

Thesis delta

The Seeking Alpha article does not shift the investment thesis; it echoes optimistic market sentiment but lacks critical analysis of ON's underlying risks, such as high valuation and execution fragility. DeepValue's 'WAIT' rating remains unchanged, as the fundamental challenges—depressed margins, cyclical auto weakness, and aggressive buybacks—persist without new evidence from the article to warrant a more bullish stance.