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On Thursday, Northland analysts downgraded Astera Labs stock from Outperform to Market Perform, setting a price target of $120. The firm cited valuation concerns and the likelihood of investors taking profits early in the New Year as the primary reasons for the downgrade. Astera Labs, which trades on NASDAQ under the ticker NASDAQ:ALAB, was noted for trading at a multiple of 44 times the CY28 consensus earnings per share (EPS) of $2.99.
The analysts acknowledged the dynamic nature of the AI market and the shift in spending towards connectivity, suggesting that the consensus estimates for CY28 might be conservative. They projected a compound annual growth rate (CAGR) of 39% for topline growth and a 42% CAGR for non-GAAP EPS growth over the next four years. The analysts' model also entertained the possibility of pushing non-GAAP EPS to $4.00 on $1.98 billion in revenue, although they recognized the difficulty of maintaining a revenue growth rate above 50% over four years for a semiconductor company.
Comparing Astera Labs' performance to industry leader NVIDIA (NASDAQ:NVDA), the analysts pointed out that from CY20 to CY24, NVIDIA's topline is estimated to grow at a 67% CAGR. However, they anticipate that by CY28, spending by cloud service providers (CSP) on AI will slow down, potentially impacting Astera Labs' growth.
Astera Labs went public on May 19, 2025, with an initial public offering (IPO) price of $36 per share. At the close of the market on December 31, 2024, the shares ended at $133.45. The analysts' outlook suggests that after a strong year in CY24, investors might start to book profits, reflecting a cautious stance on the stock's near-term future.
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