On Thursday, Bernstein SocGen Group adjusted its outlook on Analog Devices (NASDAQ:ADI) stock, increasing the price target to $220 from $200, while keeping its Market Perform rating.
The adjustment comes as signs of recovery emerge in the analog semiconductor sector following several quarters of underwhelming performance and downward revisions.
The firm cited a number of positive indicators for Analog Devices, including supportive commentary on the market bottoming out, revenue growth, effective management of channel inventories, strong bookings, and consistent operational expenditure control. Despite a slight miss on gross margins, the analyst noted that maintaining high margins in the context of significant revenue drops is commendable.
The report acknowledged ongoing debates about the precise nature of the sector's recovery, expressing caution due to the current high valuation of Analog Devices' shares.
With stock prices over 30 times next twelve months' (NTM) earnings per share (EPS) and nearing 25 times against a hypothetical future $10 EPS, the analyst expressed a view that the risk-reward balance remains even.
Reflecting these observations, Bernstein SocGen Group has raised its earnings estimates for Analog Devices. The new price target of $220 is based on a 25 times multiple of the firm's fiscal year 2025/26 average EPS estimate of $8.70, a slight increase from the previous 24 times multiple. Despite the positive signs of recovery and the increased price target, the firm maintains its Market Perform rating on the stock.
InvestingPro Insights
Bernstein SocGen Group's revised outlook on Analog Devices (NASDAQ:ADI) aligns with some of the real-time data and InvestingPro Tips available. As of the latest metrics, Analog Devices boasts a significant market capitalization of $119.17 billion, reflecting its prominent position in the semiconductor industry. The company's price-to-earnings (P/E) ratio stands at 50.67, indicating a high valuation which corroborates the analyst's caution regarding the stock's current pricing.
An InvestingPro Tip highlights that Analog Devices has raised its dividend for 22 consecutive years, showcasing a commitment to returning value to shareholders. This is particularly noteworthy given a dividend yield of 1.53%, which may appeal to income-focused investors. Additionally, the recent price performance has been strong, with a one-week total return of 12.16% and a one-month return of 26.45%, suggesting robust investor confidence in the short term.
For readers seeking a deeper dive into Analog Devices' financial health and future prospects, InvestingPro offers additional insights. There are 19 more InvestingPro Tips available, which can be explored for a more comprehensive analysis. For those interested in leveraging these insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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