Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Analog Devices Is Pulling Back Towards Support

By (Thomas Hughes )Stock MarketsNov 24, 2021 06:04AM ET
Analog Devices Is Pulling Back Towards Support
By (Thomas Hughes )   |  Nov 24, 2021 06:04AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

The semiconductor industry is in a boom, so it was expected for Analog Devices Inc (NASDAQ:ADI) to provide solid results and outlook. That is why price action surged before the release and why now, after the fact, price action is in decline.

It is a classic buy-the-rumor-sell-the-news event and one that investors can take advantage of. While the traders are making their short-term gains (or losses), investors can rest assured knowing the outlook for semiconductors is robust and that this pullback in prices will most likely lead to higher prices early in 2022, if not before the end of this year.

A Record Quarter For Analog Devices

Analog Devices had a very robust quarter, with revenue up 52.9% versus last year. The $2.34 billion also beat the consensus by 130 basis points, and that is saying something. Many other chip companies have already reported this cycle, so the analysts have had plenty of time to adjust their expectations. Regardless, strength was driven by the Industrial and Automotive segments, and we are not surprised to see that. Chip shortages within the automotive sector have it curbing production in wait of chips and parts requiring chips. The consumer segment, which was slower to rebound, returned to growth as well.

The company experienced significant margin contraction at the gross level but worse than expected and offset by revenue strength. The gross margin contracted roughly 2000 basis points and the operating margins about 2400 due to increased R&D, marketing, expenses related to the Maxim acquisition, amortization, and the extinguishment of debt. This resulted in GAAP earnings of $0.16 or $1.12 below the consensus and adjusted EPS of $1.73, which beats by $0.03.

The company says backlogs are substantial and will continue to drive growth into the coming year. The guidance for FQ1 is in line with that sentiment but a bit mixed regarding the analyst’s expectations. The analysts expect revenue of $2.47 billion and EPS of $1.68 versus the guidance of $2.4 to $2.5 billion and EPS of $1.68 to $1.88. In our view, the revenue guidance is weak and leaves the door open for outperformance on both the top and bottom lines.

The Analysts Are Pushing The Stock Higher

Only one analyst has come out with commentary since the earnings release, but the trend is positive. Since late summer, the company has picked up four new analysts, and the consensus price target is moving higher with their inclusion. The most recently initiated coverage was by UBS in October. UBS initiated with a Buy and a price target of $210 compared to the consensus of $187.70. The most recent coverage came shortly after the earnings release from BMO, which rates the stock at Outperform. BMO raised its price target to $220 marking the high price target and implying about 20% of upside.

The Technical Outlook: Analog Devices Pulls Back To Support

Shares of Analog Devices hit a new all-time high just days before the FQ4 report was released. Price is now pulling back into what looks like a 5% correction, but it is too soon to call the bottom. The short-term EMA is 5% below the all-time high and will act as support. The question is if it will hold up and propel prices higher? In our view, the answer is yes, and if not at the EMA, then not too much further below it. Not only does Analog Devices offer growth in the high-profile microchip industry, but it trades at a relative value to peers in the group and pays a safe and growing 1.5% dividend yield. If not, there will be a chance to buy this outstanding stock at an even lower level.

Analog Devices stock chart.
Analog Devices stock chart.

Original Post

Analog Devices Is Pulling Back Towards Support

Related Articles

Analog Devices Is Pulling Back Towards Support

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email