On Friday, Mizuho Securities adjusted its outlook on Allegro MicroSystems (NASDAQ:ALGM), a leading semiconductor company. The firm reduced its price target on the stock to $26.00 from the previous $32.00 while maintaining an Outperform rating.
The analyst at Mizhuo revised the revenue and earnings per share (EPS) estimates for Allegro MicroSystems for the upcoming quarters. The December quarter (DecQ) forecast was adjusted from $207 million and an EPS of $0.14 to $200 million and an EPS of $0.12. This contrasts with the consensus estimates which had predicted $208 million in revenue and an EPS of $0.15.
Looking forward, the firm also updated its full-year estimates for fiscal 2025 ending in March (F25E). The new projection is $775 million in revenue with an EPS of $0.39, a decrease from the previously anticipated $792 million and $0.45 EPS. This revision is slightly below the consensus estimates of $794 million in revenue and an EPS of $0.41.
For fiscal year 2026, Mizuho's forecast has been adjusted from $1.03 billion in revenue and an EPS of $1.16 to $988 million and $1.06 respectively. The consensus for the same period stands at $1.04 billion in revenue and an EPS of $1.08.
In the commentary provided by the analyst, the reduction in price target reflects a change in the price-to-sales ratio (P/S) valuation for fiscal 2026, which is now 4.8 times, down from the previous 5.7 times. Despite the lowered price target and estimates, Mizuho's analyst emphasized confidence in Allegro MicroSystems' continued success in the internal combustion engine (ICE) and electric vehicle (xEV) markets, as well as new direct current (DC) opportunities.
In other recent news, Allegro MicroSystems, a sensor technology specialist for the automotive sector, received a positive outlook from UBS. The firm's analysis suggests a potential for cyclical recovery, with earnings per share forecasts for fiscal years 2025 and 2026 higher than consensus estimates. UBS believes that Allegro's potential to increase prices or gain market share is not fully accounted for in current estimates.
Allegro MicroSystems reported strong first-quarter fiscal 2025 results with sales reaching $167 million. The company anticipates a low double-digit growth in sales for the second quarter, with sales projections ranging from $182 million to $192 million and a gross margin between 49% and 51%.
The company also secured a $400 million term loan deal, restructuring its existing credit agreement to optimize its financial structure and support future growth. The funds are allocated for various initiatives, including a stock repurchase agreement with Sanken Electric Co., Ltd., leading to the retirement of over 10 million shares.
In its Annual Meeting of Shareholders, Allegro MicroSystems ratified several key decisions, including the election of directors, the appointment of PricewaterhouseCoopers, LLP as the company's independent registered public accounting firm, and an advisory vote on executive compensation.
InvestingPro Insights
To complement Mizuho's analysis, recent data from InvestingPro provides additional context on Allegro MicroSystems' (ALGM) financial position and market performance. The company's market capitalization stands at $4.51 billion, with a P/E ratio of 54.32, indicating a relatively high valuation compared to earnings. This aligns with an InvestingPro Tip noting that ALGM is "Trading at a high earnings multiple."
InvestingPro data shows that ALGM's revenue for the last twelve months as of Q1 2025 was $937.99 million, with a revenue growth rate of -9.3% over the same period. This negative growth trend is reflected in another InvestingPro Tip, which states that "Analysts anticipate sales decline in the current year." This information supports Mizuho's revised revenue estimates and provides context for the lowered price target.
Despite these challenges, ALGM maintains a strong gross profit margin of 52.38% and an operating income margin of 14.53% for the last twelve months. An InvestingPro Tip also highlights that "Liquid assets exceed short term obligations," suggesting a solid financial foundation despite the current market headwinds.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for ALGM, providing a deeper understanding of the company's financial health and market position.
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