Needham upgrades Analog Devices, says shares have ‘additional room to run’

Investing.com -- Analog Devices was upgraded by Needham & Company in a note on Thursday, with the firm highlighting improving operating trends, strong quarterly results and rising demand across key end markets that should continue to lift earnings and the share price.

Needham analyst N. Quinn Bolton raised the stock to Buy from Hold, arguing that the firm “can no longer justify remaining on the sidelines” following better-than-expected fiscal first-quarter results and guidance that was “meaningfully above expectations.”

He noted that while shares have surged 44.7% since ADI’s fourth-quarter 2025 earnings, compared with 2.6% for the S&P 500, several catalysts support further upside. Needham set a $400 price target on the stock, based on a 30-times multiple of its 2027 earnings estimate.

Bolton wrote that “customers appear to have moved through the digestion phase,” with orders now more closely aligned with consumption trends.

He added that ADI’s core industrial business, excluding automated test equipment and aerospace and defense, remains “20% below prior peak levels,” leaving room for recovery as bookings strengthen.

Needham also cited the absence of any restocking to date, saying “a restocking cycle is still in front of the company,” while improved pricing and expanding exposure to data center and AI applications, roughly 20% of sales, continue to support growth.

Industrial revenue rose about 5% quarter over quarter, with ATE and aerospace and defense delivering record results, Needham said. The firm expects industrial revenue to rise more than 20% in the second quarter, led by ATE.

Automotive trends remain softer in the first half, but Needham said the segment should return to year-over-year growth in the second half of fiscal 2026.

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