Analog Devices Burnishes Its Reputation As An All-Weather Chip Stock

Quality comes at a price, but I still believe that overpaying does limit some of your upside. Like many (if not most) other quality chip stocks, I thought Analog Devices (ADI) shares had come too far too fast, and my opinion of the valuation back in May (around the time of the fiscal Q2 earnings report) was “meh”. Since then, the shares are up about 5%, lagging the SOX index, the S&P, and the NASDAQ.

With strong leverage to industrial markets, I expect Analog to have a good 2021, and I don’t believe the coming slowdown in 5G will last all that long. I also still see worthwhile upside from the Maxim (MXIM) deal, particularly given Analog’s past success in outperforming synergy expectations and the fact that Maxim’s shift toward more B2B markets has weighed on the apparent growth rate in recent years. Although there are a few better bargains in the chip space, and the absolute valuation isn’t impressive to me now, Analog offers above-average quality and still looks like a decent hold.

 

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Analog Devices Burnishes Its Reputation As An All-Weather Chip Stock