Analog Devices Stock Dips As Wall Street Remains Cautious Despite Earnings Beat: Retail Divided

Analog Devices Inc. ($ADI) stock dipped as much as 2% as markets opened on Wednesday despite the chipmaker topping fourth-quarter (Q4) earnings expectations, driven by a rebound in automotive chip demand.

Wall Street has responded cautiously, with analysts downgrading price targets on softer-than-expected guidance for the January quarter. 

Baird labeled Analog Devices a “defensive play,” noting that while the Q4 earnings beat was positive, concerns linger over the sustainability of its recovery moving forward.

The company posted earnings of $1.67 per share, surpassing Wall Street’s estimate of $1.64 and revenue totaled $2.44 billion, edging past the expected $2.41 billion for Q4 2024, according to Stocktwits data.

“Orders picked up steadily throughout the fourth quarter, particularly in the Automotive end market," said Analog Digital’s CFO Richard Puccio during the earnings call.

For the full fiscal, its revenue dropped 23.5% to $9.43 billion. The company attributed the downtick to weaker macroeconomic trends, particularly in the industrial and communications markets. 

Net income halved year-over-year (YoY) to $1.64 billion versus $3.31 billion with earnings per share dipping to $3.28, compared to $6.55 last year.

Gross margins dropped to 57.1%, down from 64.0% the previous year, primarily due to lower factory utilization and unfavorable product mix, according to the company. 

CEO Vincent Roche attributed the historic decline in fiscal 2024 to "unprecedented customer inventory headwinds," while Puccio acknowledged that "macro uncertainty" is slowing recovery but expressed "cautious optimism" for strong growth in fiscal 2025.

For Q1 2025, Analog Devices expects adjusted EPS of $1.53, plus or minus $0.10, and revenue of $2.35 billion, plus or minus $100 million.

In the wake of the earnings report and outlook, analysts adjusted their price targets for Analog Devices:

• Morgan Stanley: Price target lowered to $248 from $252 with an ‘Overweight’ rating.
• Piper Sandler: Price target lowered to $220 from $235 keeping a ‘Neutral’ rating.
• TD Cowen: Price target lowered to $260 from $270 keeping a ‘Buy’ rating.
• Truist: Price target lowered to $227 from $233 maintaining a ‘Hold’ rating.
• Baird: Price target maintained at $250 with a ‘Buy’ rating.
• Evercore ISI: Price target raised to $280 from $245 keeping an ‘Outperform ‘ rating.

Analog Devices Inc. Sentiment and Message Volume on Nov 27 as of 9:30 a.m. ET | Source: Stocktwits

Retail sentiment was ‘extremely bullish’ ahead of the earnings release but has since simmered to ‘neutral’ (48/100), while chatter has remained in the ‘extremely high’ zone. 

Retail investors on Stocktwits appeared surprised by the dip in stock price after a “great” earnings call, with some questioning why Macy’s Inc. ($M) stock was rising despite its earnings delay, while Analog Devices saw a dip following its earnings beat.

The Board of Directors declared a cash dividend of $0.92 per share, payable on Dec. 20, 2024, totaling approximately $456.6 million.

The stock has struggled this year, gaining only 13% on a year-to-date basis, on concerns around slowing demand for semiconductors. 

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