Analog Devices Stock Update by Bernstein SocGen on Signs of Recovery By Investing.com

On Thursday, Bernstein SocGen Group revised its outlook on Analog devices (NASDAQ:), increasing its price target to $220 from $200 while maintaining its Market Perform rating.

The correction comes as signs of recovery in the analog semiconductor sector appear after several quarters of disappointing results and downward revisions.

The company cited a number of positive metrics for Analog Devices, including supportive commentary on market rebound, revenue growth, effective channel inventory management, strong bookings and consistent control of operating expenses. The analyst noted that despite a slight decline in gross margin, maintaining high margins in the context of significant revenue declines is commendable.

The report acknowledges ongoing debates about the exact nature of the industry’s recovery, expressing caution regarding the current high valuation of Analog Devices shares.

With shares trading above 30 times trailing twelve months (NTM) earnings per share (NTM) and approaching 25 times on hypothetical future EPS of $10, the analyst expressed the view that the risk-reward balance remains even.

Reflecting these observations, Bernstein SocGen Group raised earnings estimates for Analog Devices. The new price target of $220 is based on 25 times the company’s average FY25/26 EPS estimate of $8.70, a slight increase from the previous 24 times multiple. Despite positive signs of economic recovery and the increased target price, the company maintains its Market Perform recommendation for its shares.

InvestingPro Insights

Bernstein SocGen Group’s Analog ( NASDAQ:ADI ) revised outlook is consistent with some real-time data and available InvestingPro advice. According to the latest metrics, Analog Devices boasts a significant market capitalization of $119.17 billion, reflecting its significant position in the semiconductor industry. The company’s price-to-earnings ratio (P/E) is 50.67, which indicates a high valuation and confirms the analyst’s caution regarding the current stock valuation.

InvestingPro’s tip highlights that Analog Devices has raised its dividend for 22 years in a row, demonstrating its commitment to returning value to shareholders. This is especially noteworthy given its 1.53% dividend yield, which may appeal to income-oriented investors. Additionally, recent price performance has been strong, with a weekly total return of 12.16% and a monthly return of 26.45%, suggesting strong investor confidence in the short term.

For readers who want a deeper dive into the financial situation and future prospects, Analog Devices InvestingPro offers additional information. There are 19 additional InvestingPro tips you can read for a more comprehensive analysis. Those interested in using these insights can use the coupon code PRONEWS24 to get an additional 10% off your 1 or 2-year Pro and Pro+ subscription at InvestingPro.

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