ON Semiconductor's stock is experiencing a surprising increase after the company issued financial guidance that was weaker than expected. This unexpected gain brings hope to Tesla investors that the slowdown in demand growth for electric vehicles may be coming to an end.
In the fourth quarter, ON Semi reported earnings per share (EPS) of $1.25 from sales of $2 billion. This aligns with Wall Street expectations, which were scaled back after ON issued disappointing guidance in October. Last year, ON reported EPS of $1.32 and $2.1 billion in sales.
Previously, consensus calls on Wall Street predicted EPS of $1.36 and sales of $2.2 billion. However, ON's weak October guidance caused a significant drop in their stock, with shares falling 22% on the day of the report. Currently, the shares are down approximately 15% compared to before the October guidance.
As a key supplier of semiconductors to the auto industry, particularly for electric vehicles, ON's October forecast was one of the early indications of a slowdown in demand growth for EVs.
The impact on EV stocks has been notable since the October news. Tesla shares are down about 9%, BYD shares have fallen about 29%, NIO stock is off about 26%, and Fisker shares have dropped more than 80%. While other factors have influenced these stock movements, the slowdown in EV demand growth has played a role in each instance.
Looking ahead to the first quarter, ON expects sales of $1.85 billion, slightly below the estimated $1.92 billion by Wall Street. While this forecast represents a 4% shortfall compared to expectations, it is still an improvement from the 9% shortfall in fourth-quarter figures.
Despite the weaker guidance, investors have responded positively so far. In premarket trading, ON stock was up 5.9%, while futures on the S&P 500 and Nasdaq Composite were down 0.2% and 0.1% respectively.
Investors will be keeping a close eye on how EV stocks react to ON's guidance going forward.
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