Allegro MicroSystems Down 30% YTD: How Should You Play the Stock?

Core Viewpoint - Allegro MicroSystems (ALGM) has faced a 30.2% decline in share price year to date, underperforming both the Zacks Electronics - Semiconductors industry and the Zacks Computer and Technology sector [1] Group 1: Company Performance - ALGM's shares are negatively impacted by lower consumer demand in industrial and automotive markets, along with intense competition and a challenging macroeconomic environment [1] - The company is making efforts to rebalance inventory and expand its product portfolio, which may enhance its market position [1] Group 2: Product Expansion - ALGM is expanding its portfolio with new sensors aimed at AI-related data centers, automotive powertrain systems, and clean energy systems [2] - The introduction of XtremeSense TMR sensors, CT455 and CT456, enhances high-power density applications with improved energy efficiency and precision [2] - The ACS37220 and ACS37041 sensors represent significant advancements over traditional components, consolidating multiple functions into single packages for better reliability and efficiency [3] Group 3: New Solutions - ALGM has introduced the Power-Thru combo chip, which includes isolated gate-driver ICs for enhanced power efficiency in clean energy applications [3] - New high-bandwidth current sensors, ACS37030 and ACS37032, support high-performance power conversion using GaN and SiC technologies, suitable for electrified vehicles and clean energy solutions [3] Group 4: Market Challenges - A significant portion of ALGM's revenue is derived from the automotive sector, particularly electric vehicles, making it highly dependent on this market [5] - A Goldman Sachs report indicates a slow growth rate in the global EV market, posing challenges for ALGM [5] - The company faces stiff competition from major players like Analog Devices, Monolithic Power Systems, and Texas Instruments in both magnetic sensor and power IC segments [6] Group 5: Financial Outlook - For the second quarter of fiscal 2025, ALGM expects total revenues between $182 million and $192 million, with a Zacks Consensus Estimate of $187.1 million, reflecting a year-over-year decline of 32.09% [7] - The consensus estimate for earnings is 6 cents per share, unchanged in the past 30 days [7] - ALGM's current valuation is considered stretched, as indicated by a Value Style Score of F [7]