Analog Devices (NASDAQ:ADI) was raised to Overweight from Equal-Weight at Morgan Stanley on Friday, with analysts raising the firm's price target for the stock to $225 from $276 per share.
They told investors that they are upgrading the stock as the severity of the current downturn "should point to a bottom in 2Q24 - down 20-25% from peak."
The analysts outlined three reasons for the upgrade. These included ADI having outperformed peers in the past three downcycles, the company’s forward earnings being de-risked as it has already guided down materially, and the company having relatively higher ASP products.
"Analyzing past cycles, we find that while duration has stayed relatively consistent at 22-26 months, over/under shipment between cycles isn't consistent. This current cycle peaked in May 2022, and taking a 24-month peak to trough view, we expect a bottom in May 2024," the analysts explained.
"Consensus revisions have turned negative and numbers have derisked, turning us more constructive on the group as visibility of a bottom has improved. We shift our preference to a late downcycle playbook, upgrading ADI and turning more optimistic on the group," they added.