Raymond James assumes coverage on Astera Labs stock with Market Perform rating

Investing.com - Raymond James has assumed coverage on Astera Labs (NASDAQ:ALAB) with a Market Perform rating on Thursday. According to InvestingPro data, Astera Labs currently trades at a P/E ratio of 124.39, suggesting a premium valuation despite the neutral rating.

The research firm cited Astera’s position as a leading supplier of high-speed connectivity solutions that has benefited from the GenAI megatrend, but noted that shares appear fairly valued with long-term structural challenges ahead. This assessment aligns with InvestingPro Fair Value analysis, which suggests the stock is currently overvalued, despite impressive revenue growth of 136.51% in the last twelve months.

Raymond James highlighted Astera’s first-to-market advantage for PCIe 5 and 6 technologies, which has given the company outsized market share in these segments with strong positions at Amazon and Google, though competitors like Broadcom, Marvell, and Credo are described as "fast followers."

The firm acknowledged that Astera’s newer Scorpio PCIe fabric switches expand the company’s serviceable available market, while also noting solid progress in the growing Active Electrical Cable markets, though Credo remains the market leader in that segment. Astera’s financial foundation appears solid, with InvestingPro data showing the company holds more cash than debt and maintains a strong current ratio of 12.78.

Raymond James pointed to potential disruptions from Ethernet for Scale-Up Networking and co-packaged optics as major risks to the bull thesis, while also noting that diminished content in NVIDIA’s Blackwell NVL systems is largely offset by custom ASIC growth with significant content expansion opportunities. Despite these challenges, Astera Labs maintains a robust gross profit margin of 75.41% and has seen its stock price surge 50.34% over the past six months. For investors seeking a comprehensive analysis of Astera’s financial health and growth prospects, InvestingPro offers a detailed Research Report, available among 1,400+ top US equities.

In other recent news, Astera Labs has been making headlines with several significant developments. BNP Paribas Exane has initiated coverage on Astera Labs with an Outperform rating and a price target of $225. This suggests a potential upside of over 50% from the current stock levels. Additionally, Northland has upgraded Astera Labs from Market Perform to Outperform, setting a price target of $175. This upgrade is linked to the anticipated earnings growth from the Scorpio X product, expected to ramp up in spring 2026.

Astera Labs also announced that its Leo CXL Smart Memory Controllers are powering Microsoft Azure’s M-series virtual machines preview. This marks the first deployment of Compute Express Link (CXL) memory expansion technology, addressing the needs of memory-intensive workloads. The collaboration with Microsoft allows for significant memory capacity expansion, overcoming traditional server architecture limitations. These recent developments highlight Astera Labs’ strategic moves and partnerships in the tech industry.

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