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Valued at a market cap of $101.6 billion, Analog Devices, Inc. (ADI) is an original equipment manufacturer of semiconductor devices, specifically analog, mixed-signal, and digital signal-processing integrated circuits. The Wilmington, Massachusetts-based company specializes in data conversion, signal processing, and power management technology.
This semiconductor company’s shares have massively lagged behind the broader market over the past 52 weeks. Analog Devices has gained 4.3% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 20.7%. Moreover, the stock is down 4.2% on a YTD basis, compared to SPX’s 3.2% rise during the same time frame.
Zooming in further, ADI has also lagged behind the Technology Select Sector SPDR Fund’s (XLK) 13.7% return over the past 52 weeks and 1.6% gain on a YTD basis.
On Nov. 26, ADI’s shares dropped 2% following its Q4 earnings release despite reporting stronger-than-expected adjusted earnings of $1.67 per share and revenue of $2.4 billion. However, a 10% year-over-year revenue decline, driven by continued weakness in the company’s industrial and communications markets and a 16.9% fall in adjusted EPS from the year-ago quarter, may have weighed on investor sentiments.
The bottom line was impacted by a 230 bps decline in gross margin and a 360 bps drop in adjusted operating margin. In addition to this, the company issued a pessimistic outlook for Q1 fiscal 2025, which came in below Wall Street’s estimates, further contributing to the stock’s decline.
For the current fiscal year, ending in October, analysts expect Analog Devices’ EPS to grow 11.1% year over year to $7.09. The company’s earnings surprise history is promising. It surpassed the Wall Street estimates in each of the last four quarters.
Among the 28 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on 19 “Strong Buy,” one “Moderate Buy,” and eight “Hold” ratings.
On Jan. 17, Barclays analyst Tom O’Malley maintained an “Equal-Weight” rating on ADI but lowered its price target to $210, which indicates a 3.2% potential upside from the current levels.
The mean price target of $256.19 represents a 25.9% upside from Analog Devices’ current price levels, while the Street-high price target of $295 suggests an upside potential of 45%.
