UBS Raises Analog Devices Price Target to $400

UBS analyst Timothy Arcuri raised the price target on Analog Devices (NASDAQ: ADI) to $400.00 (from $320.00) while maintaining a Buy rating.

“The commentary this earnings season has been a little weak on auto but this is de-risked by management having guided for -LSD% vs normal seasonal +1% – and by commentary that ADAS still in good shape.

For Apr Q, we raise Industrial to +7% in line with the recent seasonal trend but below the all time +10% seasonality – and off the back of such strong A&D and ATE commentary we wouldn’t be surprised if it is guided even better.

We give some of this back on Consumer (now -7%).

As for profitability, we expect a modest ~50bps GM accretion, opex up seasonally ~4% owing to the annual payroll tax increase and continued strong variable comp, adding up to EPS up nicely to $2.63 up ~10% Q/Q.

While the operating leverage doesn’t get much better from here, ADI management has picked its spots very well in data center, A&D, test and instrumentation, and the revenue growth trajectory reflects that.

Adding it all up, we raise F26E EPS $0.34 to $10.86 and F27E $1.17 to $13.78; we refresh comp multiples (up from 25x to 28x and in-line with peers as the market has gained conviction on a cyclical analog recovery this year), and our PT rises from $320 to $400.

We reiterate Buy.”

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