On Thursday, CFRA analyst Angelo Zino upgraded Analog Devices stock (NASDAQ:ADI) from 'Buy' to 'Strong Buy', maintaining a price target of $250.00. The upgrade comes as InvestingPro data shows ADI trading at a P/E ratio of 68.95x, suggesting investors' strong confidence in the company's future growth. Zino highlighted the company's recovery from what appears to be the cyclical trough, with orders down nearly 30% from peak levels, signaling potential for consensus estimates to see modest upside.
Analog Devices has demonstrated a strong content growth narrative, particularly in the automotive and industrial sectors, which account for 73% of its sales. With a robust gross margin of 57.08% and annual revenue of $9.43 billion, the company's efforts to reduce lead times to seven to eight weeks are expected to contribute to a healthier business environment. Zino noted that new capacity additions are anticipated to fuel long-term growth, alongside industrial advancements in instrumentation, testing, and factory automation. InvestingPro identifies ADI as a prominent player in the Semiconductors industry, with 12 additional key insights available to subscribers.
The automotive sector is identified as Analog Devices' most significant growth opportunity, with the company's product offerings in battery management systems, audio systems, and connectivity leading the charge. The positive outlook extends to the January quarter revenue and earnings per share (EPS) guidance, which suggests a 5.5% recovery from low levels.
Zino's analysis also points to stable pricing for Analog Devices' products and a rebound that should enable the company to increase returns to investors. The maintained price target of $250 is based on a price-to-earnings (P/E) ratio of 27.2 times CFRA's calendar year 2026 earnings per share estimate of $9.20, which is above the company's historical forward averages. This valuation reflects the analyst's confidence in Analog Devices' growth prospects and financial stability.
In other recent news, Analog Devices reported strong financial performance with revenues of $9.4 billion and earnings per share of $6.38 in fiscal year 2024. The company anticipates a gradual recovery in fiscal 2025, primarily driven by the industrial sector. Analog Devices has also seen changes to its board of directors with the appointment of Andrea F. Wainer, a healthcare executive, and amendments to its bylaws. The company is under investigation by China's Commerce Ministry for allegations of unlawful subsidization and dumping of chips. This probe follows complaints from Chinese semiconductor companies about the US Chips Act. Several analyst firms, including Truist Securities, TD Cowen, Piper Sandler, and Goldman Sachs, have updated their ratings and price targets for Analog Devices. These are among the recent developments for Analog Devices.
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