Needham analyst Quinn Bolton has maintained their neutral stance on ADI stock, giving a Hold rating on February 15.
Quinn Bolton has given his Hold rating due to a combination of factors that influence the future performance of Analog Devices. While the company reported better than expected results for the first quarter of fiscal year 2024, their guidance for the second quarter revenue was significantly lower than anticipated, which is attributed to ongoing inventory adjustments, particularly in the industrial sector. Although there has been a sequential improvement in bookings and the inventory correction is nearing completion, expected to be largely resolved by the end of the second quarter, there are concerns that the recovery in the second half of the year may be subdued. This is due in part to persistent weak demand and inventory corrections in the automotive segment, which could potentially lead to a decrease in automotive revenue in the latter half of the year.
Furthermore, Bolton anticipates that the recovery in Analog Devices’ gross margins will be gradual, with the next-generation gross margin unlikely to return to the 70% threshold until the second half of fiscal year 2025. This revised outlook has led to a downward adjustment of future earnings estimates. Considering these revised estimates and the current trading multiple—which is over 25 times the projected next-generation earnings per share for calendar year 2025—Bolton maintains a Hold rating on ADI stock. This suggests that while the company’s present financial health may not warrant a downgrade to Sell, the tempered expectations for near-term recovery and valuation metrics do not justify an upgrade to Buy either.
Bolton covers the Technology sector, focusing on stocks such as Lattice Semiconductor, Maxlinear, and Micron. According to TipRanks, Bolton has an average return of 32.4% and a 68.02% success rate on recommended stocks.
In another report released on February 15, Wells Fargo also maintained a Hold rating on the stock with a $185.00 price target.
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Analog Devices (ADI) Company Description:
Massachusetts-based Analog Devices, Inc. is a multinational semiconductor company, which designs, develops, manufactures, and markets integrated circuits (ICs) that leverage analog, mixed-signal, and digital signal processing technologies. The company offers data converter products, power management and reference products and digital signal processing and system products. The company also serves clients in the industrial, automotive, consumer, and communications markets.
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