Things Are Looking Up For Analog Devices, Bernstein Says

Analog Devices, Inc. ADI seems poised to benefit in the near to medium term given continued strong demand, as well as a possible uptrend in communications in the back half of the year and the growing electric vehicles (EV) space, according to Bernstein.

The Analog Devices Analyst: Stacy Rasgon upgraded the rating for Analog Devices from Market Perform to Outperform, while raising the price target from $165 to $185.

The Analog Devices Thesis: The merger deal with Maxim Integrated Products Inc. MXIM looks imminent and cash returns appear “set to markedly accelerate,” Rasgon said in the upgrade note.

With this, Analog Devices “can rapidly return $2B-$3B post-close to bring leverage back to ~1.5x targets, with the combination potentially doing ~$4B+ in FCF by FY2023 which will all be returned, attractive (~7% yield) vs the company's current ~$60B EV,” he wrote.

“The primary risk remains demand sustainability. However, this is not unique to ADI, and the company seems to be managing well, with a lean channel and comm/auto trajectories that are likely safer; we judge risk-reward to be favorable,” the analyst wrote.

ADI Price Action: Shares of Analog Devices had risen by 4.70% to $160.32 at the time of publication Thursday.

(Photo: Firmbee via Pixabay)