/Analog%20Devices%20Inc_%20logo%20on%20phone%20with%20purple%20backdrop-by%20IgorGolovniov%20via%20Shutterstock.jpg)
Wilmington, Massachusetts-based Analog Devices, Inc. (ADI) designs, manufactures, tests, and markets integrated circuits (ICs), software, and subsystems products. Valued at $104.1 billion by market cap, the company's products are used in communications, computer, industrial, instrumentation, military, aerospace, automotive, and high-performance consumer electronics applications.
Shares of this global semiconductor leader have underperformed the broader market considerably over the past year. ADI has gained 15% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 31.1%. In 2024, ADI’s stock rose 6%, compared to the SPX’s 24.1% rise on a YTD basis.
Narrowing the focus, ADI’s underperformance is apparent compared to the SPDR S&P Semiconductor ETF (XSD). The exchange-traded fund has gained about 16.6% over the past year. However, ADI’s returns on a YTD basis outshine the ETF’s 2.7% gains over the same time frame.
The underperformance of ADI can be attributed to geopolitical tensions and concerns about a potential recession. Additionally, increasing competition from industry players like Texas Instruments Incorporated (TXN), who are actively integrating generative AI capabilities into their products, poses a significant challenge.
On Aug. 21, ADI shares closed up more than 1% after reporting its Q3 results. Its revenue of $2.31 billion surpassed analyst estimates of $2.27 billion. The company’s adjusted EPS of $1.58 exceeded analyst estimates of $1.51.
For the current fiscal year, ended in October, analysts expect ADI’s EPS to decline 37.2% to $6.34 on a diluted basis. The company’s earnings surprise history is impressive. It beat or matched the consensus estimate in each of the last four quarters.
Among the 27 analysts covering ADI stock, the consensus is a “Strong Buy.” That’s based on 19 “Strong Buy” ratings, one “Moderate Buy,” and seven “Holds.”
This configuration is less bullish than two months ago, with 20 analysts suggesting a “Strong Buy.”
On Nov. 19, Bank of America Corporation (BAC) kept a “Buy” rating and lowered the price target on ADI to $245, implying a potential upside of 16.4% from current levels.
The mean price target of $261.16 represents a 24.1% premium to ADI’s current price levels. The Street-high price target of $295 suggests an ambitious upside potential of 40.2%.
