Truist Securities has adjusted the price target for Analog Devices (NASDAQ: NASDAQ:ADI), bringing it down to $266.00 from the previous $275.00, while maintaining a Buy rating on the stock. The firm noted that Analog Devices had surpassed consensus estimates for its second quarter of the fiscal year, which ended in July.
Additionally, the guidance for the third quarter, ending in October, is approximately 3% above the seasonal average, indicating signs of a cyclical recovery in the sector.
Despite the third-quarter guidance being in line with consensus expectations, it is viewed as a positive signal, particularly for the broader semiconductor industry. Truist Securities highlighted this outlook as an encouraging sign, especially for companies like Monolithic Power Systems (NASDAQ:MPWR), which also holds a Buy rating from the firm.
The analysis by Truist Securities acknowledged some concerns, particularly the incremental weakness in the automotive end market, which could be worrisome for NXP Semiconductors (NASDAQ:NXPI), another company with a Buy rating.
However, the overall stance on the semiconductor sector remains constructive, with a particular endorsement of Analog Devices due to its strategic approach to managing its product portfolio, channel management, and capital allocation.
Truist Securities revised its earnings per share (EPS) forecast for Analog Devices for the fiscal year 2025 to $8.31, down from the previous estimate of $8.60. The new price target of $266 is based on a multiple of 32 times earnings, which reflects a 7x historical discount compared to Analog peers.
In other recent news, Analog Devices has been the subject of several financial assessments following its higher-than-expected revenue of $2.3 billion for the July quarter. Despite this, Morgan Stanley noted that the company's recovery is progressing slower than initially anticipated, with the automotive sector showing particular weakness.
However, JPMorgan and Goldman Sachs maintained an optimistic outlook, citing a stabilizing demand environment and the company's sustained margin and free cash flow generation, respectively.
Citi highlighted Analog Devices' strong performance in its Industrial, Communications, and Consumer segments, which accounted for 71% of F3Q24 sales. Despite anticipated challenges in the Automotive sector, Citi expects a forthcoming inventory replenishment in the Industrial segment to support the company's overall business performance.
Deutsche Bank maintained its Hold rating and $225.00 price target for Analog Devices, predicting a sequential drop in revenue for the first quarter of fiscal year 2025. The firm noted that Analog Devices' gross margin expansion is expected to continue, albeit with a slight improvement in the October quarter.
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