Astera Labs (ALAB) Now 58% Below Wall Street Price Targets Following Earnings Plunge

Core Insights - Astera Labs (ALAB) stock has dropped 24% in a week following disappointing Q4 earnings, now trading 58% below Wall Street's average price target of $204.47 [1] - Despite a 115% year-over-year revenue growth to $852.5 million in 2025, the company faces margin compression and rising operating expenses, with Q1 2026 expenses projected between $112 million and $118 million [1][2] - Analysts remain optimistic about Astera's position in the AI infrastructure market, with 23 analysts covering the stock and a bullish average price target indicating significant upside potential [1] Financial Performance - Q4 revenue reached $270.58 million, exceeding the consensus estimate of $250 million, with a non-GAAP EPS of $0.58, surpassing the $0.51 estimate [1] - Year-over-year revenue growth of 91.8% and sequential growth of 17% highlight ongoing momentum in AI infrastructure spending [1] - The stock has declined 22.26% year-to-date, contrasting with the S&P 500's modest positive return [1] Market Position and Growth Drivers - Astera's Scorpio fabric switch is the only PCIe 6 solution shipping in volume, contributing over 10% of Q4 revenue [1] - The company anticipates its addressable market will expand to $25 billion over the next five years, driven by strong spending from major hyperscalers like Google and AWS [1] - Astera's expansion into optical connectivity and custom solutions, including a new design center in Israel, is expected to enhance growth opportunities [1][2] Analyst Sentiment - The stock is covered by 23 analysts, with 7 rating it Strong Buy, 11 rating it Buy, and 5 rating it Hold; no analysts rate it Sell or Strong Sell [1] - The average analyst price target of $204.47 suggests a potential upside of 58% from the current price of $129.32 [1] - Some analysts project targets as high as $225, reflecting confidence in Astera's growth trajectory [1] Technical Analysis - The stock is approaching oversold territory, with an RSI reading of 38.82, indicating potential for further downside if macro conditions worsen [2] - Historical data shows that ALAB has recovered from similar oversold conditions in the past [2] - The current valuation at 106 times trailing earnings and 26 times sales suggests limited room for execution missteps [2]