Siebel, Thomas M, CEO of C3.ai, sells $7.6m in stock
BofA Securities resumed coverage of Allegro (WA:ALEP) MicroSystems (NASDAQ:ALGM) on Monday with a Buy rating and a price target of $38.00, suggesting a potential 33% upside from the current price of $30.62. The stock has shown strong momentum, gaining over 31% year-to-date. According to InvestingPro analysis, the company currently appears overvalued compared to its Fair Value estimate.
The firm identified Allegro as a leader in producing magnetic sensors that are essential components for electric vehicles and advanced driver assistance systems focused on safety. BofA also highlighted the company’s growth opportunities in power management chips for data centers and clean energy applications. InvestingPro data shows the company maintains a strong financial position with a current ratio of 4.3, indicating robust liquidity to fund its growth initiatives. InvestingPro subscribers have access to 12 additional key insights about ALGM’s business fundamentals and market position.
Despite current subdued automotive demand, BofA expects a cyclical recovery in the near to medium term that could benefit Allegro significantly. The firm projects Allegro will achieve a 13% sales compound annual growth rate and a 46% profit-EPS compound annual growth rate from calendar years 2024 through 2027.
These growth projections represent 1.3 times the sales growth and 3 times the earnings growth compared to Allegro’s industry peers, according to BofA’s analysis. The firm noted these industry-leading growth expectations as key factors supporting its positive outlook.
BofA’s $38 price target is based on a price-to-earnings multiple of 28 times calendar year 2027 estimated earnings, which the firm indicated is in line with peer valuations of 27-28 times earnings.
In other recent news, Allegro MicroSystems, Inc. reported fourth-quarter results that exceeded expectations, leading to a positive outlook for investors. The company posted adjusted earnings per share of $0.06, surpassing the analyst estimate of $0.05. Revenue for the quarter reached $192.82 million, beating the consensus forecast of $185.36 million, though it was a 19.9% decrease from the same quarter last year. Allegro provided optimistic guidance for the first quarter of fiscal 2026, projecting revenue between $192 million and $202 million, which is above analyst projections of $190.8 million. The company expects adjusted earnings per share to range from $0.06 to $0.10, compared to the $0.07 consensus estimate.
Allegro’s automotive segment, a significant portion of its business, saw an 8.3% sequential increase in sales to $140.88 million. Additionally, revenue from industrial and other sectors rose 8.7% quarter-over-quarter to $51.94 million. Despite a contraction in gross margin to 41.4% from 51.2% in the previous year, the company’s adjusted gross margin stood at 45.6%, down from 53.8% last year. The company’s strategic focus on growth areas and operating efficiencies seems to be effectively addressing the challenges in the semiconductor market.
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