PDW Review Of ONN

12/12/2014

Summary • Do Not Recommend Purchase at this time • Place on “Watch List” and wait for better entry price (<$8)• Missed a great entry point at $7 back at Oct 1 – 40% run from Oct to current• No clear catalyst that indicates a leg/gap up from here, all good is priced in• Current risk/reward at current $9.8 – down 3, up 1• Analyst are neutral, stock at price target• Longer fundamentals look positive • Solid US based semi with broad range of products & customers• High debt ratio is a mild concern• Good list of institutional owners• Huge 1B recent stock buy back – ONNN thinks it’s stock is undervalued• Tech indicators say neutral to over bought• Low oil prices (neutral), increasing interest rates (negative vs high debt), slowing world economy

(negative)• CNBC option pundit (Mike Khouw) – describes bullish option trade (target $10.37 by YE) - a

cautious short term trade (mild bullish) vs outright stock purchase • Potential take over target with any US semi consolidation (4B market cap)

Profile • ON Semiconductor Corp.

5005 East McDowell RoadPhoenix, AZ 85008United States - MapPhone: 602-244-6600Website: http://www.onsemi.com

• N Semiconductor Corporation designs, manufactures, and markets semiconductor components for electronic systems and products worldwide. It operates in three segments: Application Products Group, Standard Products Group, and System Solutions Group.

• The company serves end-user markets, including automotive, communications, computing, consumer electronics, medical, industrial, smart grid, and military/aerospace industries for various applications in the automotive electronics, smartphones, media tablets, wearable electronics, computers, servers, industrial building and home automation systems, consumer white goods, LED lighting, power supplies, networking and telecom equipment, medical diagnostics, imaging and hearing health, and sensor networks. It also serves original equipment manufacturers, distributors, and electronic manufacturing service providers. The company was founded in 1999 and is headquartered in Phoenix, Arizona.

Recent News – Over valued, bullish bet, CNBC recommends options, new applications in security cameras

Key StatsONNN INTCTrailing P/E =20 (fully valued) 18Forward (5 yr) P/E=10 (BUY) 16PEG(5 yr)=0.6 BUY 1.8Debt/Equity=70 (High) 24Short Float %= 2 (No squeeze) 3Book Value = $4

Current P/E comparable to best in sector IntelFuture – buy with a 10 P/E and PEG of O.6Profit margins better than IntelGross profit slightly down over last 3 yrsOperating & net income going up over last 3 yrsR&D, operations & other costs flat over last 3 yrs Relative high debt vs Intel

Good list of large institutional investors – they will likely drive how the stock behaves, no whales or activists

Analysts – Fully valued, neutral/hold

Tech StatsONNN 5 yr Stock price and technical indicators run in well defined channelsPrice channel is from 7 to 10, with rare 6 and 11, current price 9.8 (fully valued)Above the 50 day moving aver MFI – 40 and trending down (neutral)MACD – small peak (short term run & now fully valued)RSI – 58 (neutral to overbought)