This Semiconductor Stock May Be a Fairly Risky Play

Analog appointed Gregory Bryant Executive V.P. and President of Business Units

Mar 10, 2022 at 11:31 AM
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Analog Devices, Inc. (NASDAQ:ADI) is a semiconductor company that specializes in data conversion, signal processing, and power management technology. ADI manufactures analog and mixed signal, power management, radio frequency, and digital and sensor technologies used in electronic equipment. At last glance, ADI was trading down 3.1% at $148.86. 

On March 7, Analog Devices announced that the company has appointed Gregory Bryant to the newly created position of Executive V.P. and President of Business Units effective on March 14. According to ADI, with this role Gregory will have oversight of the company’s Industrial, Automotive, Communications, Digital Healthcare, and Consumer business units and will be responsible for continuing to scale ADI’s businesses.

Analog Devices stock has increased about 3% year-over-year and 7% since dropping down to its $143.85 bottom last May. Shares of ADI have decreased 13% year-to-date and Analog Devices stock is currently down approximately 20% from ADI's all-time high of $191.95, reached in mid-November. Moreover, ADI offers a dividend yield of 2.08% with forward dividend of $3.04. 

From a fundamental point of view, Analog Devices stock has lacked consistency in recent years and provides very little assurance at the moment for investors. ADI's balance sheet is relatively weak with $1.79 billion in cash and $6.25 billion in total debt. In addition, the semiconductor company’s trailing 12-month net income has decreased 8% since fiscal 2021 and is down 14% since fiscal 2018. Analog Devices also experienced two consecutive years of top- and bottom-line declines between fiscal 2018 and fiscal 2020, posting a 10% drop in revenues and an 18% decrease in net income.

In the options pits, traders are looking bearish, albeit amid light absolute volume. ADI's 10-day put/call volume ratio of 3.53 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 91% of readings from the past year, showing long puts being picked up at a much faster-than-usual rate over the past two weeks.  

However, analysts are extremely optimistic, with 13 of the 17 covering brokerage firms sporting "buy" or "strong buy" recommendations. In other words, ADI may be well overdue for a round of downgrades.

 

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