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On Thursday, CFRA analyst Angelo Zino increased the price target for Analog Devices (NASDAQ:ADI) to $265, up from the previous $250, while maintaining a Buy rating on the stock. Zino adjusted the target based on a price-to-earnings (P/E) ratio of 28.8 times the projected calendar year 2026 earnings per share (EPS) of $9.20. This valuation is above the historical average, reflecting an anticipated order rebound. The stock has shown strong momentum, with a 29.76% return over the past year and is currently trading near its 52-week high of $244.14. According to InvestingPro analysis, the stock is currently trading above its Fair Value, with 11 analysts recently revising their earnings estimates upward for the upcoming period.
Analog Devices reported earnings per share (EPS) of $1.63 for the January quarter, surpassing the consensus estimate of $1.54. Despite a 4% dip in sales, the results were more favorable than expected. The decline in sales was due to lower performance in the industrials, automotive, and communications segments, which decreased by 10%, 2%, and 4%, respectively. However, these were partly compensated by a 19% increase in the consumer segment. InvestingPro data reveals the company maintains strong fundamentals with a healthy current ratio of 1.93 and operates with a moderate debt level, positioning it well for future growth. Discover 15+ additional exclusive insights about ADI with an InvestingPro subscription.
Zino highlighted the positive trend in bookings across industrial and automotive markets, which account for 74% of Analog Devices’ sales. The analyst noted particular strength in China’s electric and autonomous vehicles (EVs/AVs) market. Additionally, Zino pointed out that the company’s relatively short lead times of less than 7-8 weeks could position it well for a sustained cyclical recovery.
Despite challenging industry conditions, key financial metrics for Analog Devices remain robust. Operating margin contracted by 150 basis points to 40.5% due to lower utilization and sales. Nonetheless, operating cash flow stood at 47% of sales, and the free cash flow (FCF) margin was reported at 40%.
The report also commended Analog Devices for its shareholder-friendly actions, including an 8% dividend increase and the announcement of a new $10 billion share buyback program. These moves are seen as positive indicators of the company’s financial health and commitment to returning value to its shareholders. InvestingPro data highlights the company’s impressive dividend track record, having raised its dividend for 22 consecutive years with a current yield of 1.52%. The company’s strong financial position is further evidenced by its robust free cash flow of $3.18 billion in the last twelve months.
In other recent news, Analog Devices has reported its Q1 FY2025 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $1.63, compared to the forecasted $1.54. The company also exceeded revenue projections, reaching $2.42 billion against the anticipated $2.36 billion. Following these results, Analog Devices announced a $10 billion share repurchase authorization, reflecting strong investor confidence. UBS has raised its price target for Analog Devices to $300, maintaining a Buy rating, citing improved industrial sector indicators and strategic wins in aerospace and electric vehicle systems. Benchmark analysts have also increased their price target to $275, highlighting the company’s quarter-over-quarter growth in business-to-business markets and potential for significant cash flow improvements. Meanwhile, Truist Securities adjusted its price target to $248, maintaining a Hold rating, and expressing caution over the company’s valuation despite optimistic earnings and revenue guidance. Morgan Stanley (NYSE:MS) lifted its price target to $250, maintaining an Overweight rating, and emphasized Analog Devices’ strong financial performance amidst economic uncertainties. These developments indicate a positive outlook for Analog Devices, with analysts expressing varying degrees of confidence in the company’s growth trajectory.
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