Allegro Microsystems falls despite overall market gains
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Feb 01 2024
0mins
Source: SeekingAlpha
Allegro Microsystems Inc. saw a significant decline of 6.48% as it crossed below its 5-day SMA, contrasting with the overall positive performance of the Nasdaq-100 and S&P 500, which were up 0.49% and 0.36%, respectively.
The drop in Allegro's stock price occurred amid a broader market rally driven by investor confidence in AI-linked tech stocks and positive developments in Iran's peace talks. Despite the overall market strength, Allegro's performance indicates a sector rotation away from certain tech stocks, highlighting potential concerns specific to the company or its recent performance.
This decline may present a buying opportunity for investors, but it also raises questions about Allegro's competitive positioning in the rapidly evolving tech landscape.
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Analyst Views on ALGM
Wall Street analysts forecast ALGM stock price to fall
7 Analyst Rating
7 Buy
0 Hold
0 Sell
Strong Buy
Current: 51.100
Low
35.00
Averages
39.14
High
49.00
Current: 51.100
Low
35.00
Averages
39.14
High
49.00
About ALGM
Allegro MicroSystems, Inc. is engaged in power and sensing semiconductor solutions for motion control and energy-efficient systems. The Company is a global designer, developer, fabless manufacturer and marketer of sensor integrated circuits (ICs) and application-specific power ICs, enabling the important emerging technologies in the automotive and industrial markets. Its sensor ICs enable its customers to measure motion, speed, position and current, while its power ICs include high-temperature and high-voltage capable motor drivers, power management ICs, light-emitting diode (LED) driver ICs and isolated gate drivers. Its product portfolio includes over 1,500 products across a range of high-performance analog mixed-signal semiconductors. The Company also offers tunneling magnetoresistance (TMR) sensor solutions that provide the highest magnetic sensitivity, lowest power consumption, and the smallest size by comparison to other magnetic technologies.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Market Rallies on Iran Peace Progress and AI Growth
- Tech Stock Rebound: The market rebounded overall, particularly in AI-linked tech stocks, driven by progress in Iran's peace talks, indicating investor confidence in future growth prospects.
- Nvidia Earnings Impact: Nvidia's Q1 results showed $81.6 billion in revenue with Q2 guidance between $89 billion and $92.8 billion; initial sell-off reactions have given way to a realization that AI capital expenditures are accelerating.
- Qorvo Stock Surge: Qorvo's shares jumped 7.2% to $105, marking a new 52-week high, although investors who bought five years ago would only see a return of $587.82, reflecting a short-term optimistic market sentiment.
- Market Reaction Mechanism: The market often overreacts to news, and significant price drops can present good buying opportunities for high-quality stocks, but investors should monitor changes in the discount rate affecting future earnings valuations.
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Allegro Microsystems Raises Price Target to $54
- Price Target Increase: Mizuho raised Allegro Microsystems' price target from $44 to $54, reflecting analyst Vijay Rakesh's optimistic outlook on the company's potential for multi-year growth in sectors like xEV/ADAS, which is expected to drive sustained performance.
- Earnings Forecast: Allegro anticipates Q1 earnings per share between $0.19 and $0.23, exceeding the analyst estimate of $0.20, indicating robust profitability that enhances market confidence in the company's financial health.
- Sales Projections: The company expects sales to range from $245 million to $255 million, with the midpoint of $250 million surpassing the analyst estimate of $246.9 million, suggesting strong market demand that may attract further investor interest.
- Gross Margin and Expenses: Gross margin is projected to be between 50% and 51%, while operating expenses are expected to be $80 million, plus or minus $2 million, indicating stable financial management that supports the company's long-term growth strategy.
See More
Allegro MicroSystems Q4 FY 2026 Earnings Highlights
- Sales Growth Momentum: Allegro MicroSystems reported $243 million in sales for Q4 FY 2026, reflecting a 6% sequential increase and a 26% year-over-year growth, driven by strong performance in industrial and other markets, particularly with data center sales up 41% sequentially, now comprising 14% of total sales.
- Profitability Improvement: The company achieved an EPS exceeding $0.54 for FY 2026, more than doubling from the previous year, with a gross margin of 50% and an operating margin of 15.6%, indicating effective management of costs and profitability.
- Optimistic Outlook: Management anticipates Q1 FY 2027 sales between $245 million and $255 million, with gross margins expected to remain between 50% and 51%, reflecting confidence in continued growth, especially in the data center segment, which is projected to grow over 20%.
- Significant Design Wins: Design wins for FY 2026 increased by over 30% year-over-year, with the content opportunity per rack in next-generation AI configurations rising from $150 to $425, showcasing the company's strong adaptability to technological innovation and market demand.
See More
Allegro Microsystems Q1 Guidance Meets Expectations, Shares Drop
- Stock Movement: Allegro Microsystems (ALGM) shares fell 4% in premarket trading on Thursday, primarily due to guidance for Q1 FY2027 aligning closely with market expectations, leading to a lukewarm investor response.
- Performance Review: The earnings report for the period ending March 27 revealed adjusted EPS of $0.17, surpassing the $0.16 estimate, while revenue grew 6.1% year-over-year to $243.19 million, exceeding analyst expectations of $235.94 million.
- Future Outlook: The company anticipates Q1 earnings per share between $0.19 and $0.23, with sales projected between $245 million and $255 million; although the midpoint of $250 million slightly exceeds the $246.9 million estimate, investors are still seeking stronger growth signals.
- Market Confidence: Allegro concluded FY2026 with $890 million in sales, a 23% annual increase, and non-GAAP EPS more than doubled to $0.54, reflecting robust demand in automotive and data center sectors, with the CEO expressing optimism about future growth prospects.
See More
Allegro MicroSystems Set to Announce Q4 Earnings on May 7
- Earnings Announcement: Allegro MicroSystems (ALGM) is set to announce its Q4 earnings on May 7 before market open, with consensus EPS estimate at $0.16 and revenue at $235.94 million, indicating strong market interest in its performance.
- Historical Performance: Over the past two years, ALGM has exceeded EPS estimates 100% of the time and revenue estimates 88% of the time, showcasing the company's strong profitability and effective management of market expectations.
- Estimate Revision Trends: In the last three months, there has been one upward revision and no downward adjustments to EPS estimates, reflecting increased analyst confidence in the company's future performance, which could positively impact its stock price.
- Market Reaction: Following a rating upgrade from Morgan Stanley, ALGM's stock price has risen, indicating investor optimism regarding the company's growth potential and further enhancing market anticipation for the upcoming earnings report.
See More
China Initiates Trade Investigation Against U.S., Tech Stocks Decline
- Trade Investigation Escalation: China's Ministry of Commerce announced two probes into U.S. trade practices, alleging disruption of global supply chains, seen as a direct retaliation to U.S. tariff investigations, potentially leading to further trade restrictions impacting U.S. tech companies operating in China.
- Semiconductor Industry Pressure: Geopolitical tensions in the Middle East are projected to disrupt supply chains for key materials, particularly helium, driving up prices and creating production challenges for chipmakers, adding another layer of uncertainty to the tech sector.
- Market Overreaction: In this context, several tech stocks fell sharply, with onsemi down 4.7%, Allegro MicroSystems down 2.9%, Entegris down 3.4%, Broadcom down 2.4%, and NXP Semiconductors down 2.9%, indicating a sensitive market reaction to the news.
- Investment Opportunities Arise: Despite the significant market downturn due to the news, this presents good buying opportunities for high-quality stocks, especially as onsemi trades 19.2% below its 52-week high, suggesting potential for long-term investors to see returns.
See More
Market Rallies on Iran Peace Progress and AI Growth
- Tech Stock Rebound: The market rebounded overall, particularly in AI-linked tech stocks, driven by progress in Iran's peace talks, indicating investor confidence in future growth prospects.
- Nvidia Earnings Impact: Nvidia's Q1 results showed $81.6 billion in revenue with Q2 guidance between $89 billion and $92.8 billion; initial sell-off reactions have given way to a realization that AI capital expenditures are accelerating.
- Qorvo Stock Surge: Qorvo's shares jumped 7.2% to $105, marking a new 52-week high, although investors who bought five years ago would only see a return of $587.82, reflecting a short-term optimistic market sentiment.
- Market Reaction Mechanism: The market often overreacts to news, and significant price drops can present good buying opportunities for high-quality stocks, but investors should monitor changes in the discount rate affecting future earnings valuations.
See More
Allegro Microsystems Raises Price Target to $54
- Price Target Increase: Mizuho raised Allegro Microsystems' price target from $44 to $54, reflecting analyst Vijay Rakesh's optimistic outlook on the company's potential for multi-year growth in sectors like xEV/ADAS, which is expected to drive sustained performance.
- Earnings Forecast: Allegro anticipates Q1 earnings per share between $0.19 and $0.23, exceeding the analyst estimate of $0.20, indicating robust profitability that enhances market confidence in the company's financial health.
- Sales Projections: The company expects sales to range from $245 million to $255 million, with the midpoint of $250 million surpassing the analyst estimate of $246.9 million, suggesting strong market demand that may attract further investor interest.
- Gross Margin and Expenses: Gross margin is projected to be between 50% and 51%, while operating expenses are expected to be $80 million, plus or minus $2 million, indicating stable financial management that supports the company's long-term growth strategy.
See More
Allegro MicroSystems Q4 FY 2026 Earnings Highlights
- Sales Growth Momentum: Allegro MicroSystems reported $243 million in sales for Q4 FY 2026, reflecting a 6% sequential increase and a 26% year-over-year growth, driven by strong performance in industrial and other markets, particularly with data center sales up 41% sequentially, now comprising 14% of total sales.
- Profitability Improvement: The company achieved an EPS exceeding $0.54 for FY 2026, more than doubling from the previous year, with a gross margin of 50% and an operating margin of 15.6%, indicating effective management of costs and profitability.
- Optimistic Outlook: Management anticipates Q1 FY 2027 sales between $245 million and $255 million, with gross margins expected to remain between 50% and 51%, reflecting confidence in continued growth, especially in the data center segment, which is projected to grow over 20%.
- Significant Design Wins: Design wins for FY 2026 increased by over 30% year-over-year, with the content opportunity per rack in next-generation AI configurations rising from $150 to $425, showcasing the company's strong adaptability to technological innovation and market demand.
See More
Allegro Microsystems Q1 Guidance Meets Expectations, Shares Drop
- Stock Movement: Allegro Microsystems (ALGM) shares fell 4% in premarket trading on Thursday, primarily due to guidance for Q1 FY2027 aligning closely with market expectations, leading to a lukewarm investor response.
- Performance Review: The earnings report for the period ending March 27 revealed adjusted EPS of $0.17, surpassing the $0.16 estimate, while revenue grew 6.1% year-over-year to $243.19 million, exceeding analyst expectations of $235.94 million.
- Future Outlook: The company anticipates Q1 earnings per share between $0.19 and $0.23, with sales projected between $245 million and $255 million; although the midpoint of $250 million slightly exceeds the $246.9 million estimate, investors are still seeking stronger growth signals.
- Market Confidence: Allegro concluded FY2026 with $890 million in sales, a 23% annual increase, and non-GAAP EPS more than doubled to $0.54, reflecting robust demand in automotive and data center sectors, with the CEO expressing optimism about future growth prospects.
See More
Allegro MicroSystems Set to Announce Q4 Earnings on May 7
- Earnings Announcement: Allegro MicroSystems (ALGM) is set to announce its Q4 earnings on May 7 before market open, with consensus EPS estimate at $0.16 and revenue at $235.94 million, indicating strong market interest in its performance.
- Historical Performance: Over the past two years, ALGM has exceeded EPS estimates 100% of the time and revenue estimates 88% of the time, showcasing the company's strong profitability and effective management of market expectations.
- Estimate Revision Trends: In the last three months, there has been one upward revision and no downward adjustments to EPS estimates, reflecting increased analyst confidence in the company's future performance, which could positively impact its stock price.
- Market Reaction: Following a rating upgrade from Morgan Stanley, ALGM's stock price has risen, indicating investor optimism regarding the company's growth potential and further enhancing market anticipation for the upcoming earnings report.
See More
China Initiates Trade Investigation Against U.S., Tech Stocks Decline
- Trade Investigation Escalation: China's Ministry of Commerce announced two probes into U.S. trade practices, alleging disruption of global supply chains, seen as a direct retaliation to U.S. tariff investigations, potentially leading to further trade restrictions impacting U.S. tech companies operating in China.
- Semiconductor Industry Pressure: Geopolitical tensions in the Middle East are projected to disrupt supply chains for key materials, particularly helium, driving up prices and creating production challenges for chipmakers, adding another layer of uncertainty to the tech sector.
- Market Overreaction: In this context, several tech stocks fell sharply, with onsemi down 4.7%, Allegro MicroSystems down 2.9%, Entegris down 3.4%, Broadcom down 2.4%, and NXP Semiconductors down 2.9%, indicating a sensitive market reaction to the news.
- Investment Opportunities Arise: Despite the significant market downturn due to the news, this presents good buying opportunities for high-quality stocks, especially as onsemi trades 19.2% below its 52-week high, suggesting potential for long-term investors to see returns.
See More
