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On Thursday, Truist Securities updated its outlook on Analog Devices (NASDAQ:ADI), increasing the price target to $248 from the previous $230 while maintaining a Hold rating on the company’s shares. The adjustment follows Analog Devices’ performance in the recent quarter, where the company surpassed expectations in terms of both revenue and earnings per share (EPS) for CQ4 ending in January. The stock has shown remarkable momentum, gaining over 15% in the past week and trading near its 52-week high of $244.14. According to InvestingPro data, 11 analysts have recently revised their earnings estimates upward for the upcoming period.
Analog Devices also provided guidance for CQ1 ending in April that was above the consensus, despite missing on operating profit margin (OPM). Truist Securities highlighted the company’s positive stance on bookings, visibility, channel, and growth, which suggests a "cycle on" phase in the industry. The company maintains strong fundamentals with a gross profit margin of 57.16% and operates with a moderate level of debt, as revealed by InvestingPro analysis.
However, the firm expressed concerns over the fundamentals and valuation of Analog Devices. Analysts at Truist noted that while there is a significant upturn in optimism, they believe the current stock price already reflects this sentiment. They pointed out that the consensus for the calendar year 2026 (CY26) might be overly optimistic, especially regarding operating expense control.
Even with these optimistic projections, Analog Devices’ stock is trading at 26 times earnings, which Truist Securities considers not cheap compared to the company’s historical valuation. The firm adjusted its CY26 EPS estimate slightly upward to $8.87 from $8.85. The new price target of $248 is based on a 28 times multiple of the revised CY26 EPS estimate, which includes a 5 times historical discount to Analog Devices’ peers.
The report by Truist Securities reflects a cautious optimism about Analog Devices’ future performance while signaling that the stock’s current price may have already accounted for the expected positive developments.
In other recent news, Analog Devices reported its Q1 FY2025 earnings, which exceeded analysts’ expectations. The company posted an earnings per share (EPS) of $1.63, surpassing the forecasted $1.54, while revenue reached $2.42 billion, beating the anticipated $2.36 billion. The company also announced a $10 billion share repurchase authorization, reflecting confidence in its financial position. In addition, Analog Devices reported a gross margin improvement to 68.8%, contributing to the positive financial results. Morgan Stanley (NYSE:MS) responded to these strong earnings by raising its price target for Analog Devices to $250, maintaining an Overweight rating. The firm acknowledged the company’s robust performance despite high stock valuation compared to its peers. These developments indicate that Analog Devices is navigating the current economic environment effectively, with strong performance in its automotive and communications sectors.
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