Onsemi After the Synaptics Deal Change, Investor Day (ON Stock Analysis)

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The video discusses the acquisition of Synaptics (SYNA) by ON Semiconductor (ON) for $123 per share in cash, valuing the deal at approximately $5.7 billion. This revised merger agreement is expected to be accretive to ON Semiconductor's non-GAAP earnings per share. The deal is structured with a mix of cash and stock, and ON Semiconductor will issue new stock to Synaptics shareholders. The rationale behind the acquisition includes leveraging ON Semiconductor's sales channel, increasing content per platform, and enabling cross-selling opportunities, potentially increasing the total addressable market by $30 billion. It also highlights the benefit of insourcing a portion of Synaptics' production to ON Semiconductor's manufacturing facilities, leveraging their expertise in hybrid manufacturing and advanced packaging. The financial projections for ON Semiconductor show an expected revenue CAGR of 10-12% from 2023 to 2027, with gross margins increasing to 53% and operating margins reaching 40% by 2027. Capital expenditures are projected to decrease significantly as a percentage of revenue. For Synaptics, the targets for 2030 include a revenue CAGR of 12-14%, gross margin of 53%, operating margin of 38%, and free cash flow conversion of 30-35%. The analysis contrasts the performance of ON Semiconductor and Monolithic Power Systems (MPWR), with ON Semiconductor significantly outperforming, while Synaptics' financial performance has been more volatile, particularly its operating margin, but its free cash flow has shown more stability.

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