Analog Devices Exceeds Q4 Expectations; Shares Fall

Global semiconductor company Analog Devices, Inc. (ADI) delivered robust fourth-quarter results with its Industrial and Automotive markets reaching all-time highs, and Consumer business gaining momentum in fiscal 2021.

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Following the news, shares rose 1.3% momentarily before closing the day down 1.6% and closing at $182.45 on November 23.

Robust Results

Adjusted earnings for the quarter rose 20% to $1.73 per share and beat analyst estimates by 3 cents per share.

Furthermore, Q4 revenue came in at $2.34 billion, up 53% against the prior-year quarter, surpassing analysts’ estimates of $2.31 billion.

For the full year fiscal 2021, ADI’s adjusted earnings climbed 32% to $6.46 per share, and revenue jumped 31% to $7.32 billion against the prior year.

Management Comments

Vincent Roche, President and CEO of the company, said, “As we enter fiscal 2022, our backlog and bookings remain robust, and we continue to invest in capacity, setting us up for continued growth in the years ahead.”

Roche concluded, “The past year truly demonstrated the vital importance of semiconductors to the modern digital age and we’re now better positioned than ever to capture value with our acquisition of Maxim Integrated. This combination has expanded our global team of talented employees and best-in-class technologies, and together, we will develop even more complete, high-performance solutions that define the edge of possible.”

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Guidance

Based on the current economic environment and business momentum, ADI guided Q1FY22 revenue to fall in the range of $2.50 billion to $2.70 billion marginally higher than the consensus of $2.49 billion.

Additionally, Q1 adjusted earnings are expected to be between $1.68 per share and $1.88 per share while the consensus is pegged at $1.70 per share.

Analysts’ View

Impressed by Analog’s results, increasing backlog and expected gross margin expansion, Robert W. Baird analyst Tristan Gerra lifted the price target on the stock to $220 (20.6% upside potential) from $165 while maintaining a Buy rating.

Gerra attributes his optimistic view of the stock to ADI’s resilient business model and defensive characteristics.

The analyst said, “Analog Devices has traditionally been a premium defensive name notably in downturns, while the acquisitions of Linear Tech and Hittite have further improved the company’s fundamentals, barriers of entry, and breadth of product mix. Opportunities where Analog Devices has strong exposure include communication including optical and 5G, high-end health, along with developing themes such as EV/power and Industry 4.0.”

Overall, the stock commands a Strong Buy consensus rating based on 12 Buys and 3 Holds. The average Analog Devices price target of $208.87 implies 15.41% upside potential to current levels. Shares have gained 33.3% over the past year.

Smart Score

According to TipRanks’ Smart Score rating system, Analog Devices scores a “Perfect 10” which indicates that the stock has strong potential to outperform market expectations.