Analog Devices, Inc. (NASDAQ:ADI) exploded to the upside on the back of a rating upgrade from the analysts Blayne Curtis and Christopher Hemmelgarn from Barclays, who raise the price target to $70 from the earlier $55 too. The rally was accompanied by a burst in volume too, which reached a 52-week high of 10.5 million, against the average of 2.5 million. The excitement was palpable as the rumor of Analog Devices, Inc. (NASDAQ:ADI) securing multiple sockets across the products of Apple Inc. (NASDAQ:AAPL) is taken as confirmed now by the Barclays’ report.
Apple is believed to desire the high accuracy converters of Analog Devices, Inc. (NASDAQ:ADI) for a long time now if they are to enable the 3D/Force Touch feature in their iPhone/iPad, which can be seen in iPhone 6S with the iPads following suit in 2016. If all this comes true, then an increment of $0.80 in EPS can easily be expected. Besides this, Analog Devices, Inc. (NASDAQ:ADI) may enjoy the benefit of an upside in revenue and cost side provided by the merger with Hittite Microwave LLC (NASDAQ:HITT).
On the other hand, some investors see the stock as overvalued. The EPSmg (Normalized earnings) has grown to an estimated $2.34 in 2015 from $2.18 in 2011, raising serious questions about the actual growth rate of the company, which doesn’t look to match that well with the expected rate of 8.33%.
The technical picture though, talks only about the bullish sentiment. The stock has seen a very consistent bull market in the last 5 years, punctuated by only 2 large corrections. Now a breakout has taken place on the upside, signaling that the bullish momentum is increasing and if the price can sustain above the channel boundary, then a very sharp rally to $70 or even $75 levels can be expected.