Morgan Stanley has restarted its analysis of Allegro MicroSystems (ALGM, Financial) with an "Equal Weight" stance and a price target of $23. The financial institution is hopeful about Allegro's potential to surpass industry expectations in the next three years. However, the current stock valuation suggests that much of the anticipated growth may already be reflected in its price, as noted by their analyst.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 12 analysts, the average target price for Allegro Microsystems Inc (ALGM, Financial) is $26.32 with a high estimate of $31.00 and a low estimate of $22.00. The average target implies an upside of 24.90% from the current price of $21.07. More detailed estimate data can be found on the Allegro Microsystems Inc (ALGM) Forecast page.
Based on the consensus recommendation from 12 brokerage firms, Allegro Microsystems Inc's (ALGM, Financial) average brokerage recommendation is currently 2.0, 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 $26.56, suggesting a upside of 26.06% from the current price of $21.07. 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: May 08, 2025
- Revenue: $193 million for Q4, above the high-end of guidance.
- Non-GAAP EPS: $0.06, above the midpoint of guidance.
- Gross Margin: 45.6% for Q4.
- Operating Margin: 9% for Q4.
- Adjusted EBITDA: 14.8% of sales for Q4.
- Automotive Sales: Increased 8% sequentially in Q4.
- Industrial and Other Sales: Increased 9% sequentially in Q4.
- Full Year Revenue: $725 million, a decline of 31% year-over-year.
- Full Year Gross Margin: 48%.
- Full Year Operating Margin: 9.5%.
- Cash Flow from Operations: $20 million in Q4.
- Free Cash Flow: $15 million in Q4.
- Cash and Debt: $131 million in cash and $345 million in debt at the end of Q4.
- Inventory Days: Reduced to 148 days from 182 days in the previous quarter.
- Q1 2026 Revenue Guidance: $192 million to $202 million.
- Q1 2026 Gross Margin Guidance: 46% to 48%.
- Q1 2026 Non-GAAP EPS Guidance: $0.06 to $0.10 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 fourth-quarter sales above the high-end of their guidance at $193 million, with non-GAAP EPS of $0.06 above the midpoint of their guidance.
- The company demonstrated accelerated innovation by releasing 50% more products compared to their IPO year, targeting a $12 billion market opportunity.
- Allegro Microsystems Inc (ALGM) secured new TMR wins in the biomedical market and a new automotive win in an XEV thermal management application, showcasing their competitive edge in TMR magnetic sensors.
- The company achieved record-level design wins in the fourth quarter, with more than 70% in strategic focus areas such as e-mobility, robotics, and data centers.
- Allegro Microsystems Inc (ALGM) is executing operational efficiency initiatives expected to enhance gross margins and profitability, including a restructuring program anticipated to result in annualized cost savings of at least $15 million.
Negative Points
- Fourth-quarter gross margin was 45.6%, below expectations due to a combination of mix and lower absorption as orders were fulfilled from finished goods.
- Total Q4 sales declined by 20% year-over-year, with automotive sales declining 23% and industrial and other sales declining 11% year-over-year.
- The company faced challenges with customer price adjustments before cost reductions could cycle through inventory and into the P&L, impacting gross margins.
- Allegro Microsystems Inc (ALGM) is experiencing potential signs of shortages in raw materials, particularly for data center products, which could impact future production.
- The company is navigating a competitive market in China, facing formidable local competitors, which could impact their market share and growth in the region.
