Stock Analysis

Analysts Are More Bearish On Allegro MicroSystems, Inc. (NASDAQ:ALGM) Than They Used To Be

Source: Shutterstock

The latest analyst coverage could presage a bad day for Allegro MicroSystems, Inc. (NASDAQ:ALGM), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Shares are up 7.1% to US$28.66 in the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the downgrade, the consensus from eight analysts covering Allegro MicroSystems is for revenues of US$957m in 2025, implying a definite 11% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to dive 55% to US$0.52 in the same period. Before this latest update, the analysts had been forecasting revenues of US$1.1b and earnings per share (EPS) of US$1.08 in 2025. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.

See our latest analysis for Allegro MicroSystems

NasdaqGS:ALGM Earnings and Revenue Growth February 3rd 2024

Analysts made no major changes to their price target of US$37.90, suggesting the downgrades are not expected to have a long-term impact on Allegro MicroSystems' valuation.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 9.1% by the end of 2025. This indicates a significant reduction from annual growth of 14% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 16% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Allegro MicroSystems is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Allegro MicroSystems' revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected next year, we wouldn't be surprised if investors were a bit wary of Allegro MicroSystems.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Allegro MicroSystems analysts - going out to 2026, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

Valuation is complex, but we're helping make it simple.

Find out whether Allegro MicroSystems is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at)

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.