Monday, Stifel, a financial services company, raised the price target for Analog Devices (NASDAQ:ADI) shares to $240 from $220, while maintaining a Buy rating on the stock.
The firm's analyst noted that the company's revenues are expected to align with the estimates for the April quarter, showing a decline of approximately 10% on a 13-week basis, attributed to macroeconomic softness and a reduction in channel inventory by about $100 million. This performance is consistent with the 11.1% quarter-over-quarter decline observed among large-cap peers.
The analyst also suggested that Analog Devices could potentially provide July quarter revenue guidance that exceeds the firm's estimate of a 1.0% quarter-over-quarter increase.
This outlook is optimistic compared to Texas Instruments' (NASDAQ:TXN) projected 3.8% growth at the midpoint for the same period. Analog Devices' revenue estimates for the calendar year 2024 have been adjusted down by 32.1%, which is slightly below the 20% to 30% decrease anticipated for large-cap companies during downturns, and compares favorably to the 41.2% reduction for Microchip Technology (NASDAQ:MCHP) and the 27.9% for Texas Instruments.
Several positive indicators were highlighted, including improved bookings quarter-over-quarter, a reduction in cancellations, and conversations with customers indicating a potential return to growth in the second half of the year.
Additionally, specific segments within the Industrial sector, such as Aerospace/Defense and Medical, were noted as bright spots.
Stifel maintained its Buy rating on Analog Devices, adjusting the 12-month price target to $240, which reflects a 13.1 times multiple of the company's expected enterprise value to sales for the calendar year 2025.
This adjustment was influenced by higher comparable company valuations in recent weeks. The price mentioned was based on intraday trading as of May 17, 2024.
InvestingPro Insights
Analog Devices (NASDAQ:ADI) has demonstrated a consistent commitment to shareholder returns, having raised its dividend for over two decades. This track record, coupled with a dividend yield of 1.72%, as of the first quarter of 2024, may offer investors a stable income stream during uncertain market conditions. The company's stock has also shown low price volatility, an attribute that risk-averse investors might find appealing. While the company is trading at a high earnings multiple with a Price-to-Earnings (P/E) ratio of 38.07, it's worth noting that such valuation metrics may reflect Analog Devices' status as a prominent player in the Semiconductors & Semiconductor Equipment industry.
Investors considering Analog Devices should be aware that analysts anticipate a sales decline in the current year, with revenue growth reported at -8.03% over the last twelve months as of Q1 2024. Additionally, the company's net income is expected to drop this year. However, with a strong return over the past month of 16.75%, and a price hovering near its 52-week high, at 99.11% of that peak, the market sentiment appears to remain positive. For those seeking more in-depth analysis, InvestingPro offers additional insights and tips on Analog Devices, which can be accessed with a special offer using the coupon code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription. There are 15 more InvestingPro Tips available for investors who wish to delve deeper into the company's fundamentals and market performance.
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