Recent initial public offering Astera Labs nabbed a bunch of buy ratings on Monday as Wall Street analysts initiated coverage of the chipmaker. The IPO stock initially rose on the news but later turned south with the broader market.
Barclays, Deutsche Bank, JPMorgan, Needham and Roth MKM all started coverage of Astera Labs with buy ratings and price targets of 85.
Meanwhile, Evercore ISI kicked off coverage of Astera Labs with an outperform rating and price target of 100.
But Morgan Stanley offered a dissenting opinion, initiating coverage of ALAB stock with an equal weight, or neutral, rating and price target of 81.
In morning trades on the stock market today, ALAB stock climbed as much as 9.3% to 79.47. But it ended the regular session down 2% to 71.30.
Astera Labs Seeing Fast Growth
"Astera Labs is at the forefront of connectivity within the data center and looks well positioned to take advantage of the continued growth and momentum of AI spend across the industry," Barclays analyst Tom O'Malley said in a client note.
He said Astera is "building the pipes of AI."
The Santa Clara, Calif.-based company makes connectivity chips for cloud and artificial intelligence data centers. Astera's products are focused on high-speed data transfer and overall system bandwidth expansion in data center computing systems.
Astera Labs started trading on March 20 at an IPO price of 36. It notched a record high of 95.21 on March 26 before retreating. It has since formed an IPO base with its all-time high as the official buy point.
JPMorgan analyst Harlan Sur predicted that Astera will see a compound annual growth rate of 40% in revenue and 60% in earnings per share over the next few years.
The chipmaker will benefit from its first-mover advantage and strong competitive moat, Sur said in a client note.
ALAB Stock Called A 'Pure Play'
Deutsche Bank analyst Ross Seymore said Astera trades at a significant discount to its peers.
"While such high-growth stories carry inherent volatility, we see ALAB offering investors a unique pure-play vehicle to gain exposure to the AI megatrend via a company with differentiated, broadening and strongly profitable products," Seymore said in a client note.
Needham analyst Quinn Bolton also highlighted the "pure play" nature of Astera Labs stock.
"Astera is a unique investment, in our opinion, as the company's entire product line targets connectivity challenges in cloud and AI infrastructure," he said in client note.
Bolton added, "We acknowledge Astera's valuation is rich, but the company is among the fastest growers in the semiconductor industry with industry-leading margins, and we expect estimates to rise, specifically from higher AI server shipments and/or higher retimer attach rates."
The next potential catalyst for Astera Labs stock could be the company's first-quarter report on May 7.
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