1 Magnificent Megatrend Stock Down 25% to Buy and Hold Forever

Company Overview - ON Semiconductor is a semiconductor company specializing in intelligent power solutions and intelligent sensing technologies, primarily serving the industrial and automotive sectors [2] - The company's power solutions, particularly silicon carbide chips for electric vehicles (EVs), help automakers reduce vehicle weight and extend range [3] - Its intelligent sensing technologies are crucial for advanced driver-assistance systems (ADAS) and the digitization of factories and buildings [3][4] Market Prospects - The automotive sector is poised for growth with the rise of EVs and ADAS, while the industrial sector benefits from smart factories and buildings driven by industrial automation and AI analytics [5] - Both key end markets (automotive and industrial) have strong long-term growth potential [5] Recent Challenges - The company faced a 24 5% decline in stock price last year due to weakness in its key end markets over the past 18 months [1] - In the industrial sector, the Institute for Supply Management Purchasing Managers Index (PMI) has been below 50 (indicating contraction) every month since November 2022, except for March 2024 [6] - High interest rates have made car loans more expensive, reducing vehicle sales and production, while a flood of EV models has further pressured demand [7] - In 2023, the company revised its silicon carbide chip revenue estimate for the automotive sector down to $800 million from$1 billion due to reduced demand from a key customer [8] - In 2024, the company expects silicon carbide revenue growth to be in the low- to mid-single digits compared to 2023 [9] Recovery Outlook - The company anticipates an L-shaped recovery, with muted demand, ongoing inventory digestion, and slow end-market demand persisting [10] - Management has adopted a cautious approach to guidance, avoiding overly optimistic expectations [10] Valuation and Investment Case - The stock currently trades at 15 7 times Wall Street's 2024 EPS estimate of $4, and 14 6 times the 2025 EPS estimate of$4 29, with modest revenue growth expectations of 4 2% for 2025 [12] - The semiconductor market is cyclical, and the current downturn is creating fear among investors, but a recovery is expected, potentially making 2024 a trough in earnings [13] - If the company maintains its current valuation, the stock has significant upside potential and could be a long-term hold [14]