UBS has adjusted its price target for Allegro MicroSystems (ALGM, Financial), reducing it from $30 to $22 while maintaining a Buy rating on the stock. The firm expresses worries about potential market share declines in China, particularly in the silicon carbide sector. Additionally, concerns are raised over declining prices in the power semiconductors field and a challenging inventory situation, which is considered among the worst in the industry, according to the analyst's note to investors.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 11 analysts, the average target price for Allegro Microsystems Inc (ALGM, Financial) is $28.25 with a high estimate of $35.00 and a low estimate of $22.00. The average target implies an upside of 46.93% from the current price of $19.23. More detailed estimate data can be found on the Allegro Microsystems Inc (ALGM) Forecast page.
Based on the consensus recommendation from 11 brokerage firms, Allegro Microsystems Inc's (ALGM, Financial) average brokerage recommendation is currently 1.9, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Allegro Microsystems Inc (ALGM, Financial) in one year is $26.66, suggesting a upside of 38.64% from the current price of $19.23. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Allegro Microsystems Inc (ALGM) Summary page.
ALGM Key Business Developments
Release Date: January 30, 2025
- Revenue: $178 million for Q3, a decline of 5% sequentially and 30% year-over-year.
- Non-GAAP EPS: $0.07, at the high end of guidance.
- Gross Margin: 49.1% for Q3.
- Operating Margin: 10.8% for Q3.
- Adjusted EBITDA: 17% of sales.
- Automotive Sales: $130 million, a decline of 8% sequentially and 33% year-over-year.
- Industrial and Other Sales: $48 million, increased 5% sequentially, declined 21% year-over-year.
- Magnetic Sensor Sales: $114 million, declining 12% sequentially.
- Power Products Sales: $64 million, increasing 9% sequentially.
- Cash: $149 million at the end of Q3.
- Term Loan Balance: $375 million after a $25 million principal payment.
- Cash Flow from Operations: Outflow of $8 million.
- CapEx: $14 million in Q3, expected to be approximately 6% of sales for FY25.
- DSO: 43 days.
- Inventory Days: 182 days.
- Q4 Sales Outlook: $180 million to $190 million.
- Q4 Gross Margin Outlook: 46% to 48%.
- Q4 Non-GAAP EPS Outlook: $0.03 to $0.07 per share.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Allegro Microsystems Inc (ALGM, Financial) reported third-quarter sales of $178 million and non-GAAP EPS of $0.07, both above the midpoint of their guidance.
- The company saw a significant increase in bookings, the highest in the past eight quarters, up 50% year-over-year.
- Allegro Microsystems Inc (ALGM) introduced several innovative products, including new inductive position sensors and micro power magnetic switches, expanding their market reach.
- The company is making progress in localizing its supply chain in China, with shipments from local OSAT partners already underway.
- Allegro Microsystems Inc (ALGM) continues to secure multiple design wins across key markets, including automotive and industrial applications, indicating strong future growth potential.
Negative Points
- Total Q3 sales declined 5% sequentially and 30% year-over-year, indicating a challenging market environment.
- Automotive sales, which make up a significant portion of revenue, declined 33% year-over-year.
- Gross margin decreased to 49.1%, with operating margin also declining compared to the previous year.
- The company is facing headwinds in Q4 gross margins due to annual pricing agreements and excess inventory charges.
- Allegro Microsystems Inc (ALGM) continues to experience challenges in the solar segment of its industrial business, with ongoing inventory issues.
