Things Are Looking Up For Analog Devices, Bernstein Says

Analog Devices, Inc. (NASDAQ: ADI) seems poised to benefit in the near to medium term given continued strong demand, as well as a possible uptrend in communications in the back half of the year and the growing electric vehicles (EV) space, according to Bernstein.

The Analog Devices Analyst: Stacy Rasgon upgraded the rating for Analog Devices from Market Perform to Outperform, while raising the price target from $165 to $185.

The Analog Devices Thesis: The merger deal with Maxim Integrated Products Inc. (NASDAQ: MXIM) looks imminent and cash returns appear “set to markedly accelerate,” Rasgon said in the upgrade note.

With this, Analog Devices “can rapidly return $2B-$3B post-close to bring leverage back to ~1.5x targets, with the combination potentially doing ~$4B+ in FCF by FY2023 which will all be returned, attractive (~7% yield) vs the company's current ~$60B EV,” he wrote.

“The primary risk remains demand sustainability. However, this is not unique to ADI, and the company seems to be managing well, with a lean channel and comm/auto trajectories that are likely safer; we judge risk-reward to be favorable,” the analyst wrote.

ADI Price Action: Shares of Analog Devices had risen by 4.70% to $160.32 at the time of publication Thursday.

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