Analog Devices Faces Tough Times Amid Strong Competition
Market Performance Compared to S&P 500
Wilmington, Massachusetts-based Analog Devices, Inc. (ADI) designs, manufactures, tests, and markets integrated circuits (ICs), software, and subsystem products. With a market cap of $104.1 billion, the company’s offerings play crucial roles in areas such as communications, computers, industrial applications, military, aerospace, automotive, and high-performance consumer electronics.
Over the past year, ADI’s stock performance has lagged behind the broader market significantly. The stock has increased by 15%, while the S&P 500 Index ($SPX) has surged nearly 31.1%. In 2024, ADI managed a 6% increase, compared to the SPX’s impressive rise of 24.1% year-to-date.
Comparative Funds Analysis
By narrowing the focus further, ADI’s struggles become even clearer against the SPDR S&P Semiconductor ETF (XSD), which has seen gains of about 16.6% in the same period. However, on a year-to-date basis, ADI’s performance stands out with a 6% rise, compared to the ETF’s modest 2.7% increase.
Challenges Impacting Performance
The challenges faced by ADI are partly due to ongoing geopolitical tensions and the looming threat of recession. Additionally, competition intensifies with companies like Texas Instruments Incorporated (TXN) actively integrating generative AI capabilities into their products.
After reporting Q3 results on August 21, ADI shares closed up more than 1%. The company generated revenue of $2.31 billion, surpassing analyst expectations of $2.27 billion. Moreover, its adjusted EPS of $1.58 exceeded the anticipated $1.51.
Future Earnings Projections
Looking ahead to the current fiscal year, which ends in October, analysts project a 37.2% decline in ADI’s EPS to $6.34 on a diluted basis. Yet, the company’s history of beating or matching earnings estimates remains noteworthy, having done so in the past four quarters.
Among the 27 analysts monitoring ADI’s stock, the consensus is a “Strong Buy,” derived from 19 “Strong Buy” ratings, one “Moderate Buy,” and seven “Holds.”
Changing Analyst Sentiment
This rating reflects a slight dip in bullish sentiment from two months ago, when 20 analysts had given a “Strong Buy” rating. Recently, on November 19, Bank of America Corporation (BAC) maintained its “Buy” rating but lowered the price target on ADI to $245, suggesting a potential upside of 16.4% from current levels.
Analysts project a mean price target of $261.16, which implies a 24.1% premium over ADI’s current valuation. The highest price target from analysts suggests an ambitious upside of 40.2%, reaching $295.
On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
