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Thursday - UBS has raised the price target on Analog Devices (NASDAQ:ADI) to $300 from $275, while keeping a Buy rating on the shares. The stock, currently trading at $244.32, has shown remarkable momentum with a 15.44% gain in the past week. According to InvestingPro analysis, the stock appears overvalued at current levels, though the firm’s analysts noted the industrial sector’s leading indicators have improved, a trend that was apparent in Analog Devices’ recent commentary.
Analog Devices’ positive outlook was underpinned by robust order strength, a belief that channel inventories have reached their lowest point, and a willingness to provide optimistic guidance for the July quarter and the full fiscal year. The company expects revenue growth of 7-10% versus the Street’s expectation of 9%. This optimism is reflected in InvestingPro data, which shows 11 analysts revising their earnings estimates upward for the upcoming period.
The semiconductor company has also been successful in securing wins in strategic areas such as aerospace and defense (A&D) and electric vehicle battery management systems/advanced driver assistance systems (EV BMS/ADAS), which are considered core strengths for Analog Devices.
While UBS analysts have slightly increased revenue forecasts, they note that costs are also anticipated to be higher, leaving earnings per share estimates largely unchanged. Trading at a P/E ratio of 74.45, the decision to raise the price target was influenced by a reassessment of valuation history and comparisons with peers, leading to an increase in the applied multiple from 24x to 27x.
The UBS analyst concluded that, "Net, we are modestly raising revenue but costs are a little higher so EPS is essentially unchanged as we have been more bullish than most about the analog recovery. However, in reviewing valuation history and comps, we are raising our multiple from 24x to 27x and as a result, our PT increases from $275 to $300 and we maintain our Buy rating."
In other recent news, Analog Devices reported its Q1 FY2025 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $1.63 compared to the forecasted $1.54, and revenue of $2.42 billion against the anticipated $2.36 billion. The company announced a $10 billion share repurchase authorization, reflecting its robust financial position. Following these results, Benchmark analysts raised their price target for Analog Devices to $275, maintaining a Buy rating, citing the company’s positive outlook and strong performance across B2B markets. Morgan Stanley (NYSE:MS) also increased its price target to $250, maintaining an Overweight rating, highlighting Analog Devices as a stable investment amid macroeconomic uncertainties. Meanwhile, Truist Securities adjusted its price target to $248, maintaining a Hold rating, and expressed cautious optimism about the company’s fundamentals and valuation. These developments underscore a generally positive sentiment among analysts regarding Analog Devices’ future performance, despite some concerns over valuation. The company’s strategic initiatives and strong market position continue to bolster investor confidence.
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