Morgan Stanley has stark message for Allegro stock investors

Analog semiconductors person been connected a tear. Large-cap players successful the abstraction are up 17% implicit the past 2 weeks, outpacing the broader SOX scale by a wide margin. And Allegro Microsystems has tally adjacent harder than that.

That is precisely what has Morgan Stanley sounding a enactment of caution heading into the company's upcoming net print.

Morgan Stanley's take connected Allegro Microsystems

Morgan Stanley rates Allegro Microsystems overweight with a terms people of $51, based connected 35x its CY27 non-GAAP EPS estimation of $1.45, Morgan Stanley noted. The banal closed astatine $48.98 connected May 1, giving the institution a marketplace headdress of astir $8.97 billion, according to Yahoo Finance.

The firm's May 4 probe enactment is constructive but measured. Morgan Stanley expects Allegro to present a beat-and-raise quarter, accordant with the signifier seen crossed analog and microcontroller peers this net season. But the slope is clear-eyed astir what has changed since that backdrop emerged.

"The barroom becomes progressively higher for Allegro," Morgan Stanley noted, pointing to the stock's 21% surge implicit the past 5 trading days. That determination outpaced the large-cap analog group, which was itself up 17% implicit the aforesaid play versus the SOX astatine conscionable 5%.

The Allegro numbers Morgan Stanley is moving with

For the March quarter, Morgan Stanley models gross of $236 million, up 3.1% quarter-over-quarter, astir successful enactment with the Street estimation of $236 cardinal astatine 2.9% growth. Non-GAAP gross borderline is modeled astatine 50.2%, matching the Street, Morgan Stanley noted. EPS is estimated astatine $0.17 versus the Street's $0.16.

The June 4th is wherever the divergence from statement becomes much notable. Morgan Stanley models gross of $245 million, up 3.9% quarter-over-quarter, somewhat beneath the Street's $247 cardinal astatine 4.6% growth.

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The much meaningful spread is connected gross margins. Morgan Stanley forecasts 50.6% for the June 4th versus the Street's 51.2%, Morgan Stanley noted.

The slope attributes that conservatism to the timing of lawsuit negotiations, which tin instrumentality 1 to 2 quarters to rhythm through. The slope added that negotiations had progressed amended than expected connected the past net telephone and that its estimation whitethorn beryllium conservative.

On full-year estimates, Morgan Stanley's FY26 EPS of $0.92 compares to the Street's $0.86, and its FY27 EPS of $1.45 compares to the Street's $1.39, Morgan Stanley noted. Those are some supra consensus, which is portion of what supports the overweight standing contempt the near-term caution connected margins.