Analog Devices focusing on 'profitable growth' following analyst day
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Analog Devices (NASDAQ:ADI) held its first analyst day in a few years and the semiconductor manufacturing company is focusing on "profitable growth" and could surprise investors with additional growth in the future, analysts believe.
Truist analyst William Stein, who has a buy rating and a $208 price target, noted that the company's message was focused on growth from its "highly integrated" technology thanks to organic and inorganic investments, as well as customer closeness and collaborative culture.
"New financial model reflects more positive thinking and seems realistic to us in the medium to longer-term," Stein wrote in a note to clients.
Analog Devices (ADI) shares rose slightly more than 1% to $161.82 in early trading on Wednesday.
In addition, Stein pointed out that Analog Devices' message is a positive for itself, as well as semiconductor companies as a whole.
The company said its current quarter is likely to come in near the high-end of its guidance and its demand levers, such as book and bills and backlog are still high, while inventories are low.
Analog also raised its long-term revenue growth target to between 7% and 10%, with Stein going so far as to suggest semiconductors have "permanently" changed from products where prices fall to a stable or rising category.
At the event, Analog (ADI) laid out a five-year plan that gets to $15 in earnings per share with 40% free cash flow margins, up from $6.46 per share and 33% in 2021.
Raymond James analyst Chris Caso noted that the company's forecast for 7%-10% growth, which includes its acquisition of Maxim Integrated Products, is "reasonable" and leaves room for a potential scenario for the company to top expectations. 
Caso also noted that Analog's ability to have resilient margins, even in a downturn, "ill prove to be the main differentiator of [Analog] vs. peers, driven by a hybrid manufacturing model that will allow them to maintain internal loading during downturns."
The analyst added that earnings could hit $10 per share in 2023 if the strong semiconductor cycle continues through 2023 and $15 over the next 5 years, which makes the valuation "reasonable."
Caso rates Analog Devices (ADI) outperform with a $210 price target.
On Tuesday, Goldman Sachs lowered its price target on Analog Devices (ADI) to $183 from $207, following the investor day.