.July 15, 2024 09:11:00 AM

ON Semiconductor (NASDAQ:ON) saw a more than 1% drop in pre-market trading as Citi analysts downgraded the company to Neutral from Buy, setting a new price target of $77, down from $85. Concerns were raised about the Silicon Carbide market, which makes up 12% of ON’s 2024 sales. The market is facing slowing growth and declining prices, potentially impacting margins. ON’s valuation multiple is expected to suffer as long as Silicon Carbide remains a significant part of its revenue. Historically, ON’s multiple expanded from 10X to 20X EPS during high-growth periods in the Silicon Carbide market. However, with current market conditions, analysts predict a negative impact on ON’s multiple until it exits the segment. Citi also noted that ON’s valuation may lag behind peers until it divests from Silicon Carbide, even if its semiconductor segment improves.