Shares of Analog Devices (NASDAQ:ADI) closed 2.75% lower yesterday after the company held its 2022 Analyst Day.
Nevertheless, Street analysts are mostly positive on the stock after the company's CFO Prashanth Mahendra-Rajah said that revenue is tracking ahead of expectations as sales continue to grow at a fast pace.
In the long run, Analog expects its sales to grow in the high-single-digit range between 7% and 10%, Mahendra-Rajah told investors.
The company also said it sees a path to $15 of adjusted earnings per share and a 40% free cash flow margin by 2027.
We have a tremendous opportunity ahead of us as we execute our long-term vision to build and empower the intelligent edge by bringing digital technologies and software closer to the edge, making it more intelligent and prescient, said Vincent Roche, Chief Executive Officer and Chair of ADI.
Stifel analyst Tore Svanberg reiterated a Buy rating and a Top Large-Cap Pick designation after the event. His three key takeaways from the meeting are:
1) ADI's focus on the high-end of the analog/mixed-signal IC market is a key differentiator, driving high margins/FCFs by delivering high systems-level value; 2) doubling down on its hybrid manufacturing model, leveraging foundry IP to drive mfg. efficiencies while maximizing flexibility, resulting in high and stable profit margins; and 3) New long-term financial targets that rank among the best across semiconductors and the S&P 500, Svanberg wrote in a report.
Bank of America BAC analyst Vivek Arya said that ADI is well-positioned to continue delivering best-in-class FCF generation and growth.
We come away optimistic, with ADI delivering line of sight to $15 of EPS power by 2027e (almost 2x accretion over the next 5 years) with EBIT margins of 42-50% (vs 46% in FY22e) and sales growth of 7-10%, unrivaled amongst analog peers, Arya commented.
By Senad Karaahmetovic