Wedbush Securities’s Betsy Van Hees this afternoon picks up coverage of ON Semiconductor (ONNN) from her former colleague Patrick Wang, who has gone over to Evercore Partners.
In resuming coverage, Van Hees cut the firm’s rating on ONNN from Outperform to Neutral, and cut the price target to $8.50 from $13.
The stock will not do much, writes Van Hees, until there’s some improvement in the debt situation, which includes “sizable payments” coming due in 2012 and 2013, and until there’s greater clarity on consumer and IT spending intentions. She also thinks Street estimates need to come down.
Van Hees is projecting Q3 revenue of $895.4 million and EPS of 22 cents, versus the Street’s $907 million and 24 cents. The company, despite breadth of its product line and markets, is “not immune to the challenging macro,” she argues.
ON has $1.3 billion of debt, and negative net cash of $417 million. The company must pay $118 million by the end of this year, and $365 million in 2012 and $600 million in 2013.
“We are cautious regarding ONNN��s future available capital and timely payments given the potential for the macro uncertainty to impact cash flows and new debt issuances,” she writes.
Van Hees’s $8.50 target is based on a multiple of 10 times 2012 EPS, minus 90 cents a share of debt.
ON shares today rose 6 cents, or 0.8%, to $7.28.
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