Allegro MicroSystems reported an impressive result in the fourth quarter and fiscal 2024, with revenues and earnings per share (EPS) exceeding market expectations. The company, which specializes in magnetic sensing technologies for automotive and medical applications, reported 8% growth in revenue for the current year, largely fueled by a significant 38% increase in sales in the mobility sector electric.
Allegro also set new records for annual sales and project wins, surpassing the $1 billion mark in each category. Despite the challenging macroeconomic environment, Allegro is confident in its growth prospects and expects to return to double-digit sequential growth in the second quarter of 2025, following a decline in the first quarter due to inventory rebalancing.
Strengths
- Allegro MicroSystems’ annual sales and project wins exceed $1 billion.
- Revenue growth of 8% for the full year, with a 38% increase in sales in the electric mobility sector.
- Fourth quarter operating cash flow of $54 million; free cash flow of $40 million.
- Revenues expected for 1Q 2025 between $160 and $170 million.
- First quarter gross margin expected to be 49%-50%; operating expenses between 72 and 73 million dollars.
- Voluntarily paying off a $50 million term loan will save $4 million in annual interest.
- Q1 non-GAAP EPS is expected to be between $0.01 and $0.03 per share.
- Payment of $41 million for the repatriation of Crocus intellectual property, to be recovered largely through US tax credits.
- Allegro will focus on innovation and market expansion, especially in the automotive and medical sectors.
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Company perspectives
- Allegro expects a decline in 1Q 2025, followed by double-digit sequential growth in 2Q.
- The company is planning product launches and aims to strengthen its position in the Chinese market.
- Long-term growth is expected to outpace the market, despite short-term challenges.
Bearish highlights
- Current inventory rebalancing and digestion will lead to a decline in 1Q2025.
- The recovery of the industrial sector remains uncertain and could delay until the second half of the year.
Bullish strengths
- Allegro’s e-mobility segment sees strong year-on-year growth and is expected to drive future performance.
- The company has a solid presence in the Chinese market, with positive signs in point-of-sale data.
- Supply chain improvements and diversification have allowed Allegro to respond quickly to increased demand.
Shortcomings
- The decline in June sales was attributed mainly to volume, with a glut of orders in the industrial and consumer sectors.
Highlights from the questions and answers
- Allegro addressed operational issues, saying assembly and testing operations are underutilized in the Philippines, but he is confident in the ability to ramp up.
- Inventory levels are higher than expected due to lower industrial demand, but are expected to balance out over the next few quarters.
- The company remains focused on clean energy and expects growth in industrial markets in the second half of fiscal 2025.
In summary, Allegro MicroSystems (ticker: ALGM) is navigating a complex macroeconomic landscape with strategic focus and operational efficiency. The company’s record-breaking sales and designs, along with its confident outlook and planned initiatives, suggest a solid future trajectory despite current market headwinds.
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Insights from InvestingPro
Allegro MicroSystems (ticker: ALGM) has demonstrated solid financial performance, as reflected in recent data and analyst insights. Here are some key metrics and tips investors should consider:
InvestingPro data:
- Market cap: 5.35 billion US dollars
- P/E ratio (trailing twelve months to third quarter 2024): 23.75
- Revenue Growth (Last Twelve Months Starting Q3 2024): 19.21%
InvestingPro Tips:
- Allegro MicroSystems trades at a low P/E ratio relative to near-term earnings growth, indicating potential value for investors looking at earnings potential.
- The company’s stock price movements have been quite volatile, which may be of interest to investors looking for trading opportunities based on market fluctuations.
In addition to these insights, there are 9 other InvestingPro tips for Allegro MicroSystems, which can offer a deeper insight into the company’s financial health and projections. Investors interested in learning more about these tips can find them at https://www.investing.com/pro/ALGM and can use the coupon code PRONEWS24 to get an additional 10% discount on an annual or two-year subscription to Pro and Pro+. By focusing on innovation and market expansion, especially in the automotive and medical sectors, Allegro’s strategy is in line with the positive outlook suggested by the latest financial data.
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