Morgan Stanley analyst Joseph Moore maintained a Hold rating on Allegro MicroSystems (ALGM – Research Report) today and set a price target of $23.00.
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Joseph Moore has given his Hold rating due to a combination of factors affecting Allegro MicroSystems. The company’s automotive revenue has seen a significant decline following a peak, with a 24% year-over-year decrease, which contrasts with the industry forecast of a 2% increase. This decline is attributed to customers reducing their inventory levels, and while there is potential for growth in the coming years, it is expected to remain below 2023 levels.
Another factor influencing the Hold rating is the competitive landscape, where Allegro, despite its technological leadership, faces increased pricing pressure from competitors. Additionally, the company’s gross margin has been below expectations due to lower absorption and a less favorable product mix. Although there is optimism about Allegro’s ability to outperform the industry over the next three years, the current stock valuation, trading at nearly 30 times the expected 2026 earnings per share, suggests that much of the potential upside is already reflected in the stock price.