Research

ADI – Markets are pricing in expectations for Uniform ROA to fade slightly, and management may be concerned about their liquidity, automotive business, and Maxim acquisition

October 9, 2020
  • Analog Devices, Inc. (ADI:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings with a 21.0x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and management may be concerned about their liquidity levels, automotive business, and Maxim acquisition

  • Specifically, management may lack confidence in their ability to generate a robust cash flow and maintain an industry-leading financial profile, and in Maxim’s ability to expand gross margins. They may also have concerns about the compatibility of Maxim’s power portfolio, the potential of their new road noise canceling technology, and their 5G deployment. Furthermore, they may lack confidence in their ability to sustain strength in communications across both wireless and wireline applications, and execute their high-performance analog and power solutions road map. They may also have concerns about the continued hold on their share buyback program and their current liquidity levels, and they may be exaggerating their leadership position in optical connectivity. Finally, they may lack confidence in their ability to secure automotive design win rates amidst the current turmoil of the global economy