Analog Devices Stock Target Upgrades on Signs of Recovery By Investing.com

On Wednesday, CFRA, a leading financial research firm, revised its outlook Analog devices (NASDAQ:), increasing the semiconductor maker’s price target to $240 from the previous $193. The company maintained its Hold recommendation for the stock.

The upgrade reflects a positive change in the company’s valuation, with CFRA’s new 12-month price target based on a price-to-earnings (P/E) ratio of 27.6 times calendar year 2025 earnings per share (EPS) estimates of $8.69. This P/E ratio is higher than the company’s five-year historical forward average of 23.5 times, suggesting a rebound from what the company perceives as bottom fundamentals.

CFRA left its earnings estimates unchanged for fiscal year 2024 (ending in October) at $6.39 per share and for fiscal year 2025 at $8.13 per share. For the January quarter, Analog Devices reported earnings per share of $1.40, well above the consensus estimate of $1.71.

However, sales dropped by 34%, which is still better than expected. The decline in sales affected all segments, with industrial, telecommunications, automotive and consumer sectors falling by 44%, 45%, 10% and 9% respectively.

Gross margin also declined to 66.7% from 73.7%, impacted by a less favorable product mix and lower revenue and utilization. This was part of the company’s strategy to standardize its channel mix.

Despite these challenges, CFRA believes that Analog Devices has passed the low point of its business cycle, anticipating a sequential recovery in its industrial business, which is expected to grow in the second half of the year and account for approximately 50% of its revenues.

Analog Devices is also expected to benefit from a more robust operating environment as it aims to reduce lead times back to seven to eight weeks. The company’s focus on content development in the automotive and industrial sectors is seen as a potential driver of future earnings. CFRA also anticipates that Analog Devices will return all excess free cash flow to its shareholders, reinforcing the company’s commitment to shareholder value.

InvestingPro Insights

According to the latest data provided by InvestingPro, Analog Devices ( NASDAQ:ADI ) has a market capitalization of $117.35 billion, reflecting its significant presence in the semiconductor industry. Despite the challenges outlined in the article, ADI’s commitment to shareholder value is evident in its dividend history, as the company has raised its dividend for 22 consecutive years. This proves financial stability and a friendly approach to investors.

InvestingPro Data also shows that ADI is trading at a P/E ratio of 41.79, with an adjusted P/E ratio for the trailing twelve months to Q1 2024 of 39.22. This is in line with CFRA’s analysis of the company’s valuation, which predicts earnings improvement. Moreover, the company’s stock has shown a strong return of 16.28% over the past month and is trading close to its 52-week high of 99.97% of its peak price.

For readers looking to dive deeper into ADI’s finances and future prospects, InvestingPro offers additional information. There are 17 additional InvestingPro tips that provide comprehensive analog analysis and are available at https://www.investing.com/pro/ADI. To enhance your research experience, use the coupon code PRONEWS24 to get an additional 10% off 1 or 2-year Pro and Pro+ subscriptions.

This article was generated with the assistance of AI and reviewed by an editor. More information can be found in our Regulations.