Analog Devices Showcases Top-Line Strength at Investor Day

Analog Devices, Inc. (NASDAQ: ADI) hosted Investor Day for 2022 at its headquarters in Wilmington, MA, on Tuesday and discussed its growth opportunities and financial targets.

Shares of the $83.7-billion semiconductor company declined 2.8% to close at $159.98 on Tuesday.

Analog Devices specializes in making integrated circuits using digital, analog, and mixed-signal procession technologies. Products offered are widely used in communications, consumer, automotive, and industrial markets.

Highlights of the Day

The company communicated that its technological expertise and zeal to innovate as well as favorable trends connected to digitalization, connectivity, electrification, and automation positions it well for long-term gains.

In the long term, Analog Devices anticipates revenues to grow (CAGR) within the 7%-10% range. The adjusted gross margin is expected to be at least 70%, and the adjusted operating margin is predicted to be in the range of 42%-50%.

The company predicts free cash flow margin to vary from 34% to 40% while free cash flow return is expected at 100% backed by share buybacks and dividend payouts. As a percentage of revenues, capital expenditure is expected to be between the 4%-6% range.

Analog Devices’ CEO and Chairman, Vincent Roche, commented that healthy growth opportunities have created “a path to $15 of adjusted earnings per share” for years ahead.

Regarding the Maxim Integrated acquisition, Analog Devices expects cost synergies of $400 million by the Fiscal Year 2023 (ending October 2023), as compared with the initial target of $275 million. Revenues opportunities of over $1 billion are expected in the five years of the completion of the buyout.

According to a Bloomberg report, the company expects revenues in the second quarter of Fiscal 2022 (ending April 2022) to scale to the higher end of the projection of $2.80 billion, +/-$100 million, provided in February.

Wall Street’s Take

Following the Investor Day, Harsh Kumar, an analyst with Piper Sandler, maintained a Buy rating on Analog Devices with a price target of $210 (31.27% upside potential).

The analyst believes that Analog Devices “is positioned to benefit from several secular growth drivers within the semiconductor industry.”

Overall, Analog Devices has a Strong Buy consensus rating based on 10 Buys and 2 Holds. Analog Devices’ average price forecast at $201.50 suggests 25.95% upside potential from current levels. Over the past year, shares of Analog Devices have declined 1.1%.

Bloggers Opinion

Per TipRanks data, the financial blogger opinions are 100% Bullish on ADI, as compared with the sector average of 69%.

Conclusion

Vincent Roche, said, “We have a tremendous opportunity ahead of us as we execute our long-term vision to build and empower the intelligent edge by bringing digital technologies and software closer to the edge, making it more intelligent and prescient.”

Analog Devices seem to have all the ingredients required to become a profitable investment choice.

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