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On Monday, Morgan Stanley (NYSE:MS) upgraded Astera Labs stock from Equalweight to Overweight, setting a price target of $99.00. Currently trading at $71.20, the stock has attracted strong analyst interest, with InvestingPro data showing analyst targets ranging from $75 to $140. The firm highlighted Astera Labs’ attractive valuation following recent market activity and identified several growth drivers for the company. These include ongoing investment in hyperscale data centers, the anticipated increase in NVIDIA (NASDAQ:NVDA)’s Blackwell product in the latter half of the year, and an expansion in content with application-specific integrated circuits (ASICs). According to InvestingPro analysis, the company maintains impressive gross profit margins of 75.76% and holds more cash than debt on its balance sheet, with 10 additional ProTips available to subscribers.
Astera Labs, which trades on NASDAQ under the ticker (NASDAQ:ALAB), has been recognized for having one of the highest growth expectations and a strong focus on artificial intelligence within Morgan Stanley’s coverage. Despite these factors, the company’s shares are currently trading at a valuation comparable to other AI-focused firms when looking at enterprise value to sales (EV/Sales) ratios, and at a discount when considering EV/Sales/Growth metrics.
Morgan Stanley’s analyst pointed out that while there are risks associated with competition and the introduction of new products, the current stock price presents an attractive entry point for investors. The firm’s confidence in Astera Labs’ AI narrative and its expectation of solid financial performance underpin the decision to upgrade the rating to Overweight. This outlook is supported by the company’s remarkable revenue growth of 200.19% and a "GOOD" Financial Health score from InvestingPro.
The price target is based on a multiple of 18 times the calendar year 2026 sales projection of $939 million, which leads to the $99 target. According to Morgan Stanley, this premium valuation is justified due to the scarcity of small-cap companies with a high concentration of AI revenue. The firm believes that Astera Labs is well-positioned to benefit from the most significant trends in computing and foresees substantial potential for stock price appreciation. For deeper insights into Astera Labs’ valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which covers over 1,400 US stocks with expert analysis and actionable intelligence.
In other recent news, Astera Labs, Inc. reported first-quarter earnings that exceeded analyst expectations. The company posted an adjusted earnings per share of $0.33, significantly surpassing the projected $0.10. Revenue for the quarter was $159.4 million, reflecting a 144% increase year-over-year and a 13% rise sequentially. Despite this strong performance, the company’s stock declined due to second-quarter guidance that, while above analyst consensus, did not meet high expectations set by the first-quarter results. Astera Labs forecasts second-quarter adjusted earnings per share between $0.32 and $0.33, compared to the consensus estimate of $0.30, and anticipates revenue of $170 to $175 million against the consensus of $159.5 million. The company maintained a robust gross margin of 74.9% in the first quarter and expects it to remain stable at approximately 74% in the second quarter. CEO Jitendra Mohan noted strong demand for the company’s connectivity solutions and highlighted the upcoming ramp-up of its PCIe 6 connectivity portfolio in GPU-based rack-scale systems. These developments underscore Astera Labs’ ongoing growth and strategic advancements.
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