Wolfe Research cuts Analog Devices price target to $280

Wolfe Research lowered its price target on Analog Devices (ADI) to $280 from $295, maintaining an Outperform rating, while CFRA raised its target to $265 from $250 with a Buy rating. The revised targets follow Analog Devices' Q2 2025 results, which beat EPS and revenue expectations, and the announcement of a new $10 billion share buyback program and an 8% dividend increase; however, the stock price declined post-earnings. Despite mixed price target adjustments, analysts generally maintain a positive outlook, anticipating a cyclical recovery driven by improvements in the industrial and automotive markets, with Wolfe Research slightly raising its FY26 EPS estimate to $9.15.

Analysis

Wolfe Research has adjusted its price target for Analog Devices (ADI) to $280 from $295, maintaining an Outperform rating, citing a valuation of approximately 28 times projected earnings per share (EPS) of around $10, a modest increase from ADI's historical average multiple of 27 times. This occurs while ADI trades at $211.71 with a reported P/E ratio of 67.71, which InvestingPro data suggests represents premium valuations. Despite the price target reduction, Wolfe's outlook remains positive, with its FY26 EPS estimate for ADI slightly raised to $9.15 and a CY26 EPS forecast of $9.60, aligning with a $10 EPS power expectation, against which the current stock price (22 times this earnings power) is considered reasonably valued by the firm. This sentiment is broadly supported, as 19 analysts have recently revised their earnings estimates upward for ADI. The company recently reported Q2 2025 EPS of $1.85, surpassing the projected $1.70, and revenue of $2.64 billion, beating the anticipated $2.51 billion. Concurrent with these strong results, ADI announced a new $10 billion share buyback program and an 8% dividend increase, building on its 23-year history of consistent dividend payments, which saw 15.12% growth in the last twelve months and a current yield of 1.78%. The company also reported robust operating cash flow at 47% of sales and a free cash flow margin of 40%. Despite these positive developments, ADI's stock price declined post-earnings. Complementing Wolfe's view, CFRA raised its price target for ADI to $265 from $250, maintaining a Buy rating, anticipating an order rebound and a sustained cyclical recovery driven by improving bookings in industrial and automotive markets. Analog Devices projects Q3 revenue of approximately $2.75 billion, expecting growth particularly in the industrial segment.

Key Decisions for Investors

• Investors may consider holding existing positions in Analog Devices, aligning with Wolfe Research's Outperform rating, given the strong Q2 earnings beat, significant capital return programs including a $10 billion buyback and 8% dividend increase, and positive analyst sentiment from multiple firms.
• Monitor the company's progress towards achieving its projected $10 earnings power and observe revenue and margin improvements, as these are highlighted by analysts as key drivers for sustainable stock price appreciation, particularly in the context of an early-stage economic recovery.
• Closely track order trends and cyclical recovery indicators in the industrial and automotive segments, as these are crucial for validating the optimistic outlook and supporting ADI's projected Q3 revenue growth.
• Despite strong fundamentals and positive guidance, investors should remain cognizant of the stock's current premium P/E ratio of 67.71 and the recent share price decline post-earnings, suggesting potential market sensitivity to valuation or broader sector movements.