Analysts Downgrade, Cut Price Target On Analog Devices Citing Slowdown Concerns; But Still Likely To Outperform

Analog Devices, Inc ADI clocked 77% revenue growth to $3.11 billion in Q3, beating the consensus of $3.05 billion. Adjusted EPS of $2.52 beat the consensus of $2.43.

Needham analyst Quinn Bolton downgraded Analog Devices from Buy to Hold. ADI's B2B (still above 1:1) fell below previous quarters as orders moderated and cancellations increased slightly toward the end of the quarter, Bolton noted.

ADI and the semiconductor industry, in general, are just beginning to see the start of a broader slowdown, he said. Bolton further noted that the stock has increased 16.5% since June 30 and now trades at about 19.6-times his new 2023 estimate, which is a level that is near its 10-year historical average.

Despite better supply and a strong backlog, he saw that ADI guided to the slowest Q/Q growth since COVID began. Bolton suggested investors move to the sidelines over inflated inventories. 

Raymond James analyst Melissa Fairbanks maintained Analog Devices with an Outperform and cut the price target from $210 to $200.

ADI posted another quarter of record revenue and backlog and guided to another quarter of sequential growth for October, albeit modest, reflecting some conservatism, Fairbanks noted. 

ADI is not immune to a weakening macro, Fairbanks said. Fairbanks feels the more cautious tone is appropriate given near-term uncertainty. 

However, the analyst believes the company will continue to outperform peers even in a downturn based on a solid pipeline of auto and industrial engagements, providing greater visibility and predictability over the long term. 

BMO analyst Ambrish Srivastava reiterated Outperform and price target of $190. His investment case rests on the fact that the company is structurally far more profitable than in the past and his belief that the model will prove resilient through the cycle.

Srivastava particularly appreciates the conviction around how ADI's scenario planning includes GM/OM floors of 70%/low-40%'s on a 15% Q/Q revenue decline symbolizing a far cry from the prior trough of 54%/13%. 

Price Action: ADI shares traded higher by 0.50% at $170.98 on the last check Thursday.