Analog Devices Stock Target Upgrade by BofA Securities Via Investing.com

On Thursday, BofA Securities raised its price target for Analog devices (NASDAQ: NASDAQ:) to $260 from $225, maintaining a Buy rating on the stock. This revision follows the company’s fiscal second quarter (FQ2) sales in April, which exceeded expectations by 3%, signaling what the company said was a low point in the cycle.

Fiscal third quarter (FQ3) sales are projected to increase 5.1% quarter-over-quarter to $2.27 billion, or approximately $100 million, or 5% above the consensus. This guidance indicates that Analog Devices may begin recovery approximately one quarter earlier than its industry peers.

The positive outlook is further supported by the company’s guidance indicating sequential growth across all segments in the coming quarter, with consumer and industrial sectors leading the way, and moderate growth expected in the automotive sector.

Despite limited visibility, BofA Securities expects further growth in the fiscal fourth quarter (FQ4) in October, roughly in line with the prior quarter’s results.

The company’s assessment is confirmed by its book-to-account ratio, which currently remains above 1.0x. However, the undersupply trend continues, which was $100 million in the second quarter and is expected to continue in the third quarter, potentially reaching approximately $30 million.

In light of the anticipated economic recovery, BofA Securities revised its pro forma earnings per share (EPS) estimates for fiscal years 2024 and 2025 to $6.23 and $8.14, down from $5.62 and $6.92, respectively. The company also suggests there is potential for EPS to return to the $9-10 range in fiscal years 2025 and 2026 if demand rebounds faster than currently expected.

The increased price target to $260 is based on an unchanged 34x estimated calendar year 2025 enterprise value on a free cash flow (EV/FCF) multiple. This reflects the company’s adjusted EPS estimates and the company’s financial performance forecasts.

InvestingPro Insights

Analog Devices (NASDAQ: ADI) has shown noteworthy resilience 12.16% total price refund over the last week ia 26.45% return over the last month, which indicates a positive market reception of recent events. The company’s commitment to shareholder returns is evident, among others: 1.53% dividend rate and history of dividend increases 22 consecutive yearsdemonstrating financial stability and a friendly approach to investors.

Although BofA Securities has a high price target for ADI, InvestingPro data indicates a high P/E ratio of 50.67, which suggests the company’s shares are trading at a premium to earnings. Investors should be aware that the stock is in overbought territory according to the RSI, which could indicate a potential pullback. However, with analysts predicting profitability this year and strong returns over the past five years, ADI remains a significant player in the semiconductor and semiconductor equipment industry.

For those looking to dive deeper into ADI’s financials and future prospects, InvestingPro offers additional insights and metrics. Using a coupon code PRONEWS24readers can get an additional 10% off a one- or two-year Pro and Pro+ subscription, unlocking access to a total of 20 InvestingPro Tips which could additionally influence investment decisions.

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