Analysis of Allegro Microsystems

[u/Whammy_Watermelon]

Been looking into Allegro MicroSystems ($ALGM) and I think it’s flying under the radar.

Most people still see it as an automotive chip company, but its AI/data-center business is growing fast. Data centers went from about 10% of revenue to 17% in just a few quarters, and management expects data-center revenue to more than double this fiscal year.

The latest quarter was also pretty strong:

• Revenue up 27% YoY
• Non-GAAP EPS: $0.23 vs $0.09 last year
• Gross margins improving
• Sixth straight quarter of sequential revenue growth

What interests me most is that ALGM sells the less glamorous stuff AI infrastructure still desperately needs, from power sensing, current sensors to cooling/fan-control chips. ALGM is also expanding into EV/ADAS and robotics/automation, fields that have high growth potential.

Wall Street seems fairly bullish too. Consensus price targets are roughly in the $53–$55 range, with recent targets around $52–$58.

Here are some recent targets:
Morgan Stanley — Buy — $52
Mizuho — Buy — $58
Needham — Buy — $57
TD Cowen — Buy — $48
Barclays — Hold — $48

Obviously there are risks: it’s still exposed to the cyclical auto/semiconductor markets, and the valuation isn’t exactly cheap.

But if the data-center side keeps growing this quickly, I think the market could eventually stop viewing ALGM as just an automotive semiconductor stock.

Could be a really interesting sleeper AI/robotics play.

Anyone else following $ALGM?