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Despite artificial intelligence capturing much of the attention, the semiconductor industry has had an uneven recovery coming out of the pandemic, notably the analog portion of the market.
And while some believe this segment is on the road to recovery, that mindset is not shared by everyone, especially including investment firm Baird.
“We take a more measured view, notably given our very recent channel checks highlighting a lowered demand and visibility outlook for the rest of this year industry-wide versus expectations from two months ago,” analyst Tristan Gerra wrote in an investor note. “We do not believe the recent sequential rebound in analog is sustainable.”
Despite that belief, Gerra said Analog Devices (NASDAQ:ADI) is back to shipping in-line with end demand and should see a “robust” 2025. And even if the rebound in the analog portion of the processor market — which touches everything from automotive to industrial to communications to consumer devices — isn’t real, Analog Devices is better positioned than its peers to handle the market going forward.
Gerra has an Outperform rating and $250 price target on Analog Devices.
Analog, which reported third-quarter results earlier this week, has started to see some light at the end of the tunnel, albeit in an uneven manner. Bookings for industrial, communications and consumer grew across each vertical for the fourth consecutive quarter, though automotive-related bookings declined.
Bookings were also mixed by region, with Europe being the weakest. Conversely, Asia saw growth while America was in the middle.
Delving a bit deeper, the industrial segment saw growth across all major applications, save for automation. In communications, wireless and wireless both saw growth, while consumer saw notable strength in portable devices and gaming.
The automotive segment is still dealing with customers working through inventory.
However, Analog’s management said that 2025 will see “robust growth,” aided by secular tailwinds that have helped the company have a record design win pipeline. Additionally, the company has also reduced channel inventory and worked to improve its balance sheet, which position the company “well” for a return to growth in the top line, Gerra said.
Looking ahead to the fourth quarter, Analog Devices expects revenue of $2.3B to $2.5B, with a mid-point above the consensus estimate of $2.38B. It expects fourth quarter adjusted earnings per share ranging from $1.53 to $1.73, with a mid-point in-line with the estimate of $1.63.
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