Unloved and Undervalued: A Hidden Gem in the EV Market
In the world of value investing, finding high-quality stocks that are currently unloved by the market can be a daunting task. However, one industry that has fallen out of favor in recent times is electric vehicles (EVs). Despite the long-term growth prospects, EV stocks have taken a beating, and one key chip supplier to the EV market is now trading at a tantalizingly low valuation.
Meet On Semiconductor: A Leader in Silicon Carbide Solutions
On Semiconductor (NASDAQ: ON) is a leading provider of silicon carbide (SiC) solutions for EVs and electric infrastructure. SiC is a new type of alloy that offers significant benefits, including increased efficiency and reduced size. On Semiconductor’s SiC power modules take up less space than traditional silicon, making them ideal for EVs.
A Transformed Company with a Strong Leadership
Under the leadership of CEO Hassane El-Khoury, On Semiconductor has undergone a significant transformation. The company has divested its internal fabs and lower-margin consumer businesses, positioning itself as a higher-margin producer of power, analog, and sensor chips.
Early Leadership in Silicon Carbide Manufacturing
On Semiconductor has jumped out to a leading 35% to 40% market share in the SiC industry, with management aiming to grow its SiC chip revenue at twice the rate of the industry. The company’s ability to produce the full packages containing its chips is a significant differentiator, allowing it to provide a complete solution for automaker OEMs and Tier 1 suppliers.
A Long-Term Growth Story
Despite the current downturn in the auto and EV markets, On Semiconductor’s long-term growth prospects remain intact. The transition to electric vehicles and the electrification of energy infrastructure are expected to drive growth in the coming years.
A Compelling Valuation
On Semiconductor currently trades at just 15.8 times trailing earnings, reflecting the bottom of the auto and EV bear market. However, with leading SiC solutions and an EV industry likely to reaccelerate growth in the coming years, this undervalued stock is poised for significant gains.
Don’t Miss Out on This Opportunity
If you’re worried you’ve already missed your chance to invest in the most successful stocks, now is the time to act. On Semiconductor’s beaten-down valuation presents a rare opportunity to buy a high-quality stock at a discount. Don’t wait – take advantage of this opportunity before it’s too late.
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