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Onsemi Plunges 18% as Weak Guidance Overshadows Q3 Earnings
US chipmaker Onsemi's stock crashed 18.6% at the market open after the company issued poor Q4 guidance.
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Shares of Onsemi (NADSAQ: $ON) fell more than 18% at the opening bell on Monday after the chipmaker issued a downbeat outlook for Q4 2023. Even though the company posted positive Q3 results, investors jumped ship on the poor guidance, taking the broader market index to fresh lows.
Onsemi’s Q3 EPS and Revenue Beat Estimates
Onsemi, a US semiconductor supplier, reported better-than-expected earnings and revenue for Q3 2023 on Monday. However, the company offered a poor outlook for the current quarter, sending its shares tumbling by more than 18% at the market open to $67.98.
Notably, the chipmaker reported Q3 earnings per share (EPS) of $1.39, topping the consensus estimates of $1.34. Revenue came in at $2.18 billion, above the analysts’ expectations of $2.15 billion, though down 0.5% year-over-year.
Generally Accepted Accounting Principles (GAAP) and non-GAAP gross margin stood at 47.3% in the quarter, while GAAP and non-GAAP operating margin were 31.5% and 32.6%, respectively.
“Our disciplined approach and execution resulted in another solid quarter, demonstrating the resilience in our business amid market softness.”
– Hassane El-Khoury, president and CEO of Onsemi.
Although the company beat estimates for top and bottom lines, investors were not delighted with the Q4 outlook. Onsemi expects adjusted EPS to be in the range of $1.13 to $1.27 in the fourth quarter, notably below the consensus projection of $1.36. Adjusted gross margin is estimated to range between 45.5% and 47.5%, compared to the analysts’ estimates of 47.1%.
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Semiconductor Market Index Lowest Since May 2023
Onsemi’s latest quarterly report, along with previous disappointing earnings results from other semiconductor companies, have been weighing on the broader chip market.
Last week, The PHLX Semiconductor Sector – the market index that tracks the performance of the 30 biggest US-listed chipmakers – witnessed the worst one-day performance of the year after dropping 4% on October 25. The sell-off came following a Q3 report by Texas Instruments, considered an industry bellwether. The company offered a worse-than-anticipated forecast for Q4, citing waning industrial demand.
The PHLX’s decline continued this week, with the index dropping 1.13% on Monday to 3,190 – a level last seen in May. It lost more than 7.5% over the past month despite positive results from Intel and Micron.
Do you think chip stocks will remain under pressure in the last months of 2023? Let us know in the comments below.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
