ON Semiconductor: A Large-Cap Stock Under Siege by Insiders and Short Sellers

The semiconductor sector has faced headwinds in recent years, and ON Semiconductor (NASDAQ: ON) is no exception. While the company remains a large-cap player with a $21 billion market cap, its stock has come under pressure as insiders and short sellers have increasingly turned bearish. Recent data reveals a troubling pattern of selling activity that merits caution for investors. Below, we dissect the evidence.

Insider Selling Signals Caution

Over the past year, insiders at on semiconductor have been quietly reducing their stakes. Key transactions include:
- CEO Hassane El-Khoury sold $321,765 in shares between September and November 2024.
- In Q1 2025, a Director sold 10,000 shares (valued at $432,200) on March 12, flagged as an informative sell—a move that typically reflects personal pessimism about near-term prospects.

While total insider selling in Q1 2025 totaled only $582,292, this follows a $5.56 million reduction by four insiders in the prior 12 months. With insiders owning just 0.31% of shares outstanding, such moves carry symbolic weight. Institutional investors, holding 81.2% of shares, now face a critical question: Are insiders distancing themselves from operational challenges?

Short Interest Rises Amid Weak Guidance

Short sellers are also turning bearish. As of the March 14, 2025 settlement date, 5.2 million shares were sold short—up 1.12% from the prior period. This represents 1.5% of the company’s 345 million shares outstanding, with an average 3.2 days to cover (the time needed for short sellers to repurchase shares at the current trading volume).

While this short interest remains below its 52-week high of 6.8 million, it signals growing skepticism. Analysts attribute this to the company’s disappointing Q4 2024 results, which saw revenue fall to $1.72 billion—well below expectations—and a weak Q1 2025 outlook. The restructuring plans announced in late 2024, while necessary, have done little to quell fears of prolonged underperformance.

Why the Pessimism?

The bearish sentiment stems from structural challenges in the semiconductor industry:
1. Supply Chain Volatility: ON Semiconductor’s automotive and industrial segments face prolonged demand uncertainty.
2. Margin Pressure: Pricing competition and rising R&D costs have squeezed profitability.
3. Weak Earnings Growth: Analysts expect EPS of $1.05 for Q1 2025—flat compared to the same period in 2024.

Conclusion: Proceed with Caution

The data paints a clear picture: insiders are selling, short interest is rising, and fundamentals are under pressure. While ON Semiconductor remains a leader in sensors and power management solutions, its stock is now caught in a perfect storm of weak financials and declining investor confidence.

Investors should heed the signals:
- Short interest at 5.2 million shares (up from 5.14 million previously) suggests bears are doubling down.
- Insider selling, though modest in scale, aligns with the company’s operational struggles.
- The stock’s 3.2-day cover ratio implies short sellers could amplify downward pressure if the company misses earnings again.

For now, ON appears less like a "buy and hold" large-cap and more like a stock to avoid until there are clear signs of stabilization. The next catalyst—Q1 earnings—could either validate the pessimism or offer a rare buying opportunity.

Nick Timiraos
Investment Analyst

Disclosure: The author holds no position in ON Semiconductor. Analysis is based on public data and should not be construed as financial advice.