Analog Devices (ADI), Good Quarter but Apple Estimates May Be Too High - Susquehana

Susquehana analyst, Chris Caso, maintained his Neutral rating and $67 PT after Analog Devices (NASDAQ: ADI) reported a solid October quarter but guided below consensus for January. The company blamed a delay in highly seasonal consumer revenue and when looking at the two quarters in total, the result wasn’t far from expectations, but C16 estimates do move lower.

The analyst expects the consumer business to grow Y/Y in C16, and some rebound in wireless comm from presently depressed levels but have near term concerns around the AAPL business.

Revenue of $979 mln, up 13% Q/Q and 20% Y/Y, was above the high end of guidance ($880 mln-$940 mln) and above consensus of $910 mln. Gross margin of 65.7% declined 40 bps. Opex increased 6% Q/Q,. Pro forma EPS of $1.03 compared to their estimate/consensus of $0.83 and included a $0.10 benefit from lower tax rate.

Based on the firm's current iPhone assumptions, the ADI April quarter consensus estimates are too high, and there is a chance of further cuts as we proceed through December, depending on sell through. With the stock at $60, there may not be enough headroom to own it in light of these risks, but would look to revisit on either a pullback or improved visibility regarding the AAPL business.

For an analyst ratings summary and ratings history on Analog Devices click here. For more ratings news on Analog Devices click here.

Shares of Analog Devices closed at $60.42 yesterday.

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