Shares of Analog Devices Inc (NASDAQ:ADI) rallied in early trading on Thursday after the company reported its fiscal third-quarter results.
Here are the key analyst takeaways:
- Seaport Research Partners analyst Jay Goldberg upgraded the rating from Neutral to Buy, with a price target of $425.
- Needham analyst Quinn Bolton reiterated a Buy rating, and raised the price target from $440 to $450.
Check out other analyst stock ratings.
Seaport Research Partners: Analog Devices reported revenue of $4 billion and pro forma earnings of $3.45 per share. The results came in higher than consensus estimates of $3.9 billion and $3.34 per share, respectively.
The company guided to fourth-quarter revenue of $4.3 billion and earnings of $3.86, plus or minus 15 cents per share, "comfortably ahead" of expectations of $4.1 billion and $3.54 per share, respectively, Goldberg said in a note.
"The most important takeaway" from the earnings call was that management’s assessment of the company’s AI opportunity is larger than was expected, estimating at around $1 billion to $1.5 billion per GW (gigawatt), the analyst stated. "With the acquisition of Empower, ADI now claims their opportunity extends all the way to the rack, which is a significant expansion," he further wrote.
Needham: Analog Devices’ data center growth continues to accelerate, "underpinned by the company’s grid to chip strategy spanning grid monitoring, energy storage, and power delivery through the rack," Bolton said.
While Analog Devices reported gross margins of 72.5%, "driven by favorable mix and higher utilization," management guided to an expansion to around 74% in the fourth quarter, he added.
"Management believes the current upcycle could extend well beyond a typical cyclical recovery, noting AI and defense as secular drivers that should persist for several years," the analyst wrote.
Management also pointed to around 100 GW of data center buildout expected through 2031, generating $1 billion to $1.5 billion per GW, which could support double-digit growth versus the prior 5%-7% revenue CAGR target, he further noted.
ADI Price Action: Shares of Analog Devices had risen by 1.48% to $378.80 at the time of publication on Thursday.
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