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On Thursday, Stifel analysts maintained their Sell rating and $18.00 price target for Alpha & Omega Semiconductor (NASDAQ:AOSL). The firm’s analysts cited the recent revenue beat for the March quarter, which was up by 4.2% compared to their previous estimate. This increase was attributed in part to tariff-related pull-ins, particularly in notebooks and tablets. The analysts also noted a slightly higher revenue outlook for the June quarter, with the midpoint of the revenue guidance being 1.5% above their prior estimate. This rise is also linked to pull-ins and temporary impacts in certain consumer applications.
Despite the revenue uptick, Stifel analysts pointed out limited near-term (NT) gross margin expansion. The non-GAAP gross margin guidance midpoint stands at 24.0%, which aligns with their prior forecast and current gross profit margin of 24.24%. However, this comes at a time when factory utilization is likely above 90%, suggesting little room for near-term growth in margins, especially as pricing pressure remains high. InvestingPro analysis reveals that three analysts have recently revised their earnings downward for the upcoming period, though the company is expected to return to profitability this year.
The update on Blackwell, Alpha & Omega Semiconductor’s AI accelerator daughter card, was acknowledged by Stifel analysts as a positive development. The product is contributing to growth in graphics for computing, and the company has confirmed its first design win for an on-board AI server power in a single SKU, which is expected to ship in the second half of the year. Despite these advancements, Stifel recommends tempering expectations due to the large number of Blackwell SKUs and significant competition in the market.
Stifel’s analysts concluded their remarks by emphasizing the need for greater clarity on the sustainability of demand and profitability before revising their stance on Alpha & Omega Semiconductor. They reiterated their 12-month price target of $18, which is based on 0.6 times the enterprise value to projected CY26 sales.
In other recent news, Alpha and Omega Semiconductor Ltd. reported its third-quarter fiscal year 2025 earnings, revealing a non-GAAP EPS of -$0.10, which did not meet the forecast of $0.0033. The company’s revenue was $164.6 million, slightly below the expected $167.77 million, but still marked a 9.7% increase year-over-year. Despite missing earnings expectations, the company showed significant growth in its computing and power supply sectors, with the latter experiencing a 32.4% year-over-year increase. Looking ahead, Alpha and Omega provided guidance for the fourth quarter of fiscal year 2025, expecting revenue to be approximately $170 million, plus or minus $10 million, indicating low to mid-single-digit sequential growth. The company is transitioning from a component supplier to a total solutions provider, a strategic shift highlighted by CEO Stephen Chang. Analysts from firms such as Stifel and Benchmark engaged with the company, discussing aspects like tariff impacts and future growth in AI and graphics cards. The company also reported a cash balance of $169.4 million and operating cash flow of $7.4 million for the quarter.
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