Key Points
- Institutional support for Analog Devices is high and rising.
- The analysts' support is also strong for this stock.
- The outlook is brighter than for most semiconductor stocks and the dividend leads the sector.
The outlook for the semiconductor industry has been on shaky footing for the last several quarters but you wouldn’t be able to tell by looking at institutional activity through Analog Devices Inc. (NASDAQ: ADI). The institutions have rotated their holdings and they’ve been net bearish for three of the last four quarters. However, net activity for Analog Devices stock this year is bullish and holdings are high.
The institutions netted more than 0.5% of the market cap early in 2022 and then slowly trimmed that figure back to about 0.45% of the market cap by the time Q4 results were released. Now that those results are in, there is a good chance the institutions will stop trimming their holdings and net activity will turn firmly bullish once more. As it is, the institutions hold about 85% of the stock with the rest in public hands.
Firm Analyst Support for ADI
The analysts are in support of the stock as well. The consensus rating has held firm at a "moderate buy" for at least the last 12 months and the price target has held steady as well. The consensus price target is down slightly in the 30-day comparison but even so, it is relatively flat in the 90- and 365-day comparisons. The post-Q4 release activity includes at least four major reports that include no rating changes, three price target increases and one price target reduction. The consensus of these four is around $183 and below the $188.95 consensus but still above the recent price action.
Assuming the company stays immune from the broader semiconductor industry downturn, the consensus sentiment and price target could trend higher in 2023 and lead the stock higher along with them. The risk is that analog-focused makers such as Analog Devices and Texas Instruments Inc. (NASDAQ: TXN) have yet to avoid a general downturn in semiconductor stocks. The odds are high that it will succumb to slowing market fundamentals sooner or later.
“While the economic backdrop continues to cause demand uncertainty, we are well-positioned in the near term with stabilizing orders, a strong backlog and continued design win momentum,” said Vincent Roche, CEO and chair.
Analog Devices Beats and Raises Guidance for 2023
Analog Devices had a solid Q4 to cap off a winning 2022. The company reported $3.25 billion in net revenue for a gain of 38.8% over last year that beat the consensus figure by 280 basis points. Sequential gains were made in all end markets but the industrial, automotive and communications segments stand out because they are among the hottest growth markets.
All reached record sales in 2022. Revenue strength not only carried through to the bottom line but was leveraged by scale and buybacks. The $2.73 in adjusted EPS is up a full $1 from last year and beat by 540 basis points as well. Turning to the guidance, the company’s range for 2023 is above the consensus at the low end for both revenue and EPS.
Analog Devices’ Dividend Helps Support Price Action
Analog Devices’ dividend is not the highest in the semiconductor industry, such as compared to Intel (NASDAQ: INTC), but it is among the best in the sector. The stock yields about 1.9% on a forward-looking basis and is backed up by share repurchases as well. The payout ratio is a low 31% of the 2023 consensus which is, apparently, too low so safety is better than it looks at first glance. The CAGR is running about 11% as well. The history of increases stands at 18 years, so the outlook for distribution increases is very positive.
Analog Devices’ share prices rocketed higher in the wake of the Q4 release but investors should take note of the all-time high. The all-time high is not too far above the price action and below the analyst consensus target, so may provide fierce resistance. If the stock can get above that level, investors can expect additional upside. Until then, investors should prepare for range-bound trading and sideways movement until early in 2023 at least.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Intel (INTC) | $42.24 | +4.3% | N/A | 4,213.21 | Reduce | $34.84 |
| Texas Instruments (TXN) | $183.78 | +2.0% | 3.09% | 33.56 | Hold | $191.67 |
| Analog Devices (ADI) | $282.06 | +1.7% | 1.40% | 61.85 | Moderate Buy | $281.87 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
- Professional Background: Thomas Hughes is the Managing Partner of Passive Market Intelligence LLC, a market research platform he launched in 2023 with the mission: “We watch the market so you don't have to.” He has worked as a blogger, stock market commentator, and independent analyst since 2010 and has been actively involved in trading and investing since 2005.
- Credentials: He holds an Associate of Arts in Culinary Technology—training that honed his discipline, attention to detail, and ability to anticipate outcomes, all of which carry over into his work as a market analyst.
- Finance Experience: Thomas has been writing about finance and investing since 2011, when he discovered it could be more than a personal passion—it could be a profession. He’s been a contributing writer for InsiderTrades.com since 2019.
- Writing Focus: He specializes in the S&P 500, small-cap stocks, dividend and high-yield strategies, consumer staples, retail, technology, oil, and cryptocurrencies. His analysis blends chart-based technical setups with key fundamental insights, helping readers identify actionable trends.
- Investment Approach: Thomas takes a hybrid approach that combines technical analysis with deep fundamental research. He often writes about macroeconomic shifts, earnings trends, and sentiment-based trading signals.
- Inspiration: Thomas first became interested in stocks after attending a seminar on how to buy and sell your own shares. That event opened his eyes to the market's potential and sparked a lifelong interest in investing.
- Fun Fact: Thomas took up model railroading by accident a few years ago—and now he can’t stop running the rails.
- Areas of Expertise: Technical and fundamental analysis, S&P 500, retail and consumer sectors, dividends, market trends
Education
Associate of Arts in Culinary Technology
