Investing.com – The electronic chip sector remains one of the strategic sectors of the moment as supply difficulties and tensions between the United States and China have revived it. The rapid development of the automotive sector has also contributed to strong demand for chips.
Bank of America (NYSE:BAC) named On Semiconductor a top automotive pick and reiterated its buy rating on the stock, following what it called a “confident” presentation from the company. leadership this week. This is in addition to the news that On Semiconductor has signed a long-term contract with BMW (ETR:BMWG) for the supply of electric vehicles.
“This win complements other notable wins for ON at Tesla (NASDAQ:TSLA), Mercedes, Jaguar Land Rover, VW, Hyundai (KS:005380) and Nio. Despite macro headwinds impacting consumers and some markets IT and industrial, automotive semiconductors remain a bright spot, confirmed by ON and several peers TXN, MCHP and WOLF.”
On Semiconductor shares are more than 26% higher in 2023, having also outperformed last year despite falling 8%. The bank’s new $100 price target, however, means the shares can still climb 27%.
The bank says this is because the automotive sector remains a strong growth theme as the adoption of battery-powered EVs and related charging infrastructure drive demand for semiconductors.
“We expect ON to maintain/increase its market share of 25-30% for CY23E SiC devices, while benefiting from its leadership in image sensors for advanced driver assistance systems”
The stock is expected to have a fair value of $94.44 on average according to the Investing Pro model, representing an upside potential of 14.7%. The stock price is at the top of its 52-week range posing a downside risk. Analysts expect an average price of 91.42 dollars with a range between 74 and 105 dollars.
See the Investing Pro templates for more details on the stocks mentioned and their fair values as well as other indicators.
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