ON Hits All-Time High on Price Target Hike & Offering Options Trade

Added: 2026-05-26

[00:00:00][music] >> Welcome to MorningTrade Live. Let's focus on semiconductor chip stocks today. We [music] are rallying across the board. Nvidia's higher, Micron continues to scale these highs here, 17.7% [music] TSMC up 2 and 1/2, Intel up 2. On Semi is up 10% [music] right now.

[00:00:19]And that is very much the focus of the MorningTrade off the back of a change to the price target here. Looks like we've hit a new all-time [music] high in the market this morning. We're up 136% year-to-date. We're up 210 over the course of the last year as well. So, let's get to Marley Kayden to join us to just break down the details of what the analysts are saying here. Good morning, Marley. Hope you had a wonderful long weekend. Just talk us through this note.

[00:00:45]I did. Thank you, Sam. Good to see you this morning. Yes, On Semi having a really nice move to the upside today. Up more than 10%. We are at a new high right now, just at about $128 right now, after BofA raised the price target for On Semi. They raised it to $138 from $115, keeping a buy rating. That puts us about $10 their target price, about $10 where we above where we are right now. The com- They're saying that the company's multi-year content game seem to be underappreciated in the shares. Obviously, that written before this 10% move to the upside on the new high today. The company's core industrial and auto markets have finally turned a quarter a corner, according to this analyst here, going from headwinds to what they're calling now cyclical tailwinds. The firm also believes that these tailwinds are being augmented by what they're calling transformative growth in AI data. Now, if you look at On Semi, I mean, they've gone in a year from $44 up to $128 so far today. That's up more than 210% over the last year, 135% year-to-date, close to 30% so far over the last month.

[00:01:52]And BofA not alone here. Just in the last month, we've gotten some a broad wave of price target hikes. JP Morgan, Susquehanna, Goldman Bank of America, this is their second in a month and Goldman Sachs, as well as KeyBank.

[00:02:05]KeyBank raised their price target up to 125, keeping an overweight rating. Now, they're probably going to make an adjustment to that as we're now north of that and they have a pretty bullish call here.

[00:02:15]But the unifying message across all of these firms right now as you look at this company, the ones who are in the buy camp, saying that they're starting to see meaningful recovery from management. AI data is under demand is guided to double year over year in 2026.

[00:02:28]That's cited in pretty much every note.

[00:02:31]But there is some disagreement about how much of the recovery is already here in the stock. Right now, there's about 40% of the analysts who cover this company have a buy rating or a buy equivalent.

[00:02:43]About 60% have a hold. And the average price target right now is about $104.

[00:02:49]And now mind you, we're at $128.

[00:02:53]As we look at the bull case, they see ON Semi as this leverage play on vehicle electrification. They have their deal with Xiaomi and their EV SUV. They also cite GlobalFoundries collaboration as positioning them in the company the cutting edge of next gen power. So, a lot of growth drivers there. The bull scenario points to as high as 100 about $150 price target over the next year and gross margins re-expanding toward about 42%. The bear case is always tied to valuation as you look at those notes. PE sitting at about 340 implied forward PE about 45. Their net income in 2025 collapsed about 92% and that's cited pretty much across the board. They also saw declines in all three segments in the double digits in Q4. However, the bulls argue that these are one-time hits. They're not indicative of something that's going to have underlying issues going forward.

[00:03:45]They think that they're one-offs as they say evidenced by their free cash flow margin expanding to about 24%. So, bear scenario looking at the low end of price targets is south of $100. It's like right near $70 right now. At the high end of that, closer to 150. But, this move from BofA today is for 138, their new price target. And with this 10% move to the upside, we're about 128 right now, Sam.

[00:04:10]Yeah, I guess you could argue that the valuation looks a little bit rich at this point when you look at the others.

[00:04:14]I mean, except for like an AMD, for instance. But, as you say, I mean, it seems to be off the back of the first quarter earnings, doesn't it? And it really around that framing, it seemed around the CEO saying that they're at an inflection point. With you as you say, that data center growth as well. So, really interesting as far as the market.

[00:04:31]Not everybody buying it now, but 10 and 1/2% pop is very nice as far as the performance is concerned today. Thanks so much for that, Molly. Let's trade on semi now with Tim Bigam, options strategist over at Pilot AI. Tim, hope you had a nice weekend. Just walk us through an example trade on this name.

[00:04:47]Yeah, absolutely, Sam. Had a very good weekend. Hopefully, you as well. And this is a stock that I would not be chasing here at all. I think it's certainly getting a little out over the skis, to say the least, as you just alluded to. Valuations certainly now stretched. So, I'll be a patient buyer on a dip here, using that kind of 105 support level where it broke out post earnings last time. So, just going out to July, selling the 105 100 put spread.

[00:05:18]Last I looked, getting just over a buck net credit. So, like that return on risk. Like the you know, downside cushion, too, with the stock well above that 120 level, right? Have plenty of downside cushion, as well. And we're also seeing the call skew. In other words, the IV on the calls so far ahead of the puts, which most of these AI-related chip stock names are showing that speculation getting a little bit uh, too extreme, as well, I think. So, I think we're probably due for at least a period of consolidation. So, I would not be, uh, anywhere a buyer around here, but somewhere down around that 105 level looks more interesting. I'll get paid for my patience by selling this out of the money put credit spread.

[00:06:03]All right, good stuff, Tim. Always appreciate it. A nice 10 and 1/2% pop now for On Semi. Thanks for the example trade, Tim Bigam there, option strategist Pilot AI.