Analog Devices: Why It's Not My Number One Pick

Nov. 07, 2024 10:40 PM ETAnalog Devices, Inc. (ADI) Stock
Bashar Issa profile picture
Bashar Issa
5.66K Followers
(10min)

Summary

  • Analog Devices faces challenges with diverse product portfolios, making it difficult to assess advantages across its broad range of microchips and electric components.
  • ADI's long-term growth potential is modest at 7-10%, insufficient to justify its high 37x forward PE ratio, especially compared to peers like OnSemi.
  • ADI missed out on high-growth markets like Silicon Carbide (SiC) for EVs, impacting its competitive edge and market positioning.
  • Despite stable cash flows and share buybacks, ADI's current valuation appears unattractive given its limited growth prospects and market dynamics.

Different integrated circuits in plastic and ceramic DIP packages

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Investment Thesis

Electric component manufacturers like Analog Devices (NASDAQ:ADI) present a unique challenge to analysts. Their product portfolios span thousands of microchips and electric components, each with its own revenue drivers and market dynamics. For example, a mobile

This article was written by

Bashar Issa profile picture
5.66K Followers
Bashar is a contributing writer at Seeking Alpha, focusing on Long/Short investment ideas, with a geographic focus in North America. Before that, Bashar worked at an Investment Fund in the United Kingdom. He has a Master's degree in Finance from the Queen Mary University of London and a Bachelor's degree in Economics from Middlesex University.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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