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Wilmington, Massachusetts-based Analog Devices, Inc. (ADI) designs, manufactures, tests, and markets integrated circuits (ICs), software, and subsystems products. Valued at a market cap of $108.2 billion, the company offers amplifiers and comparators, analog to digital converters, video encoders and decoders, embedded processing products, and DSPs, to name a few.
Companies valued at $10 billion or more are generally described as “large-cap” stocks and Analog Devices fits right into that category. The semiconductor company specializes in data conversion, signal processing, and power management technology and caters to a wide range of industries, including 5G communications, remote healthcare, electric vehicles, and ocean and climate research.
Despite its strengths, Analog Devices’ shares have faced significant challenges. After hitting a 52-week high of $244.14 on Jul. 17, they have slipped 8.6%. Over the past three months, ADI stock declined 5%, lagging behind the Invesco Semiconductors ETF’s (PSI) marginal increase.
Moreover, in the longer term, ADI has gained 12.4% on a YTD basis, lagging behind PSI’s nearly 16.9% returns. Shares of ADI are up 21.9% over the past 52 weeks, underperforming PSI’s 31.8% gains over the same time frame.
To confirm its recent bearish trend, ADI has been trading below its 50-day moving average since early November. However, the stock has been trading above its 200-day moving average since late November.
On Nov. 26, shares of ADI dipped 2% after its Q4 earnings release despite delivering a better-than-expected performance. The company’s adjusted earnings of $1.67 per share surpassed the Wall Street estimates of $1.64, and its revenue of $2.44 billion also outpaced the consensus estimates of $2.41 billion.
However, a significant decline in both revenues and adjusted earnings primarily due to unprecedented customer inventory headwinds and weaker macroeconomic trends, particularly in the industrial and communications markets, coupled with the company’s cautiously optimistic outlook, might have dampened investor confidence and resulted in its downward price movement.
Moreover, ADI has lagged behind its rival, Texas Instruments Incorporated (TXN), which has rallied 18.4% on a YTD basis and 30% over the past 52 weeks.
Despite ADI’s recent underperformance relative to its industry peers, analysts remain moderately optimistic about its prospects. The stock has a consensus rating of “Moderate Buy” from the 28 analysts covering it, and the mean price target of $257.04 suggests a 15.2% premium to its current levels.
