Allegro MicroSystems (ALGM): Strategic Positioning in the EV Sensor Market Amid Bank of America's Upgraded 'Buy' Rating

Bank of America's recent resumption of coverage on Allegro MicroSystems (NASDAQ: ALGM) with a “Buy” rating and a $38.00 price target underscores the firm's confidence in the company's strategic positioning within the rapidly evolving electric vehicle (EV) sensor market. This rating, which implies a 33% upside from ALGM's current price of $30.62, reflects a nuanced assessment of Allegro's technological leadership, market dynamics, and long-term growth potential in a sector poised for explosive expansionBank of America Lowers Allegro MicroSystems (NASDAQ:ALGM) Price Target to $38.00^[1].

BofA's Rationale: A Confluence of Innovation and Market Tailwinds

Bank of America's analysis highlights Allegro's dominance in magnetic sensor technology for EVs and advanced driver assistance systems (ADAS), a critical component in the transition to electrified transportation. The firm notes that Allegro's expertise in Hall-effect and XMR (xMR) sensors positions it to capitalize on the shift toward 800V electrical architectures in EVs, which demand higher-precision current and voltage monitoringAllegro MicroSystems Stock Gets Buy Rating as BofA Resumes Coverage^[2]. Additionally, BofA identifies untapped opportunities in power management chips for data centers and clean energy applications, areas where Allegro's recent acquisition of Crocus Technology in 2023 has strengthened its R&D capabilitiesCurrent Sensor Market - Company Evaluation Report, 2025^[3].

Despite a recent 19.9% year-over-year revenue declineAllegro MicroSystems (NASDAQ:ALGM) Coverage Initiated by Analysts^[4], BofA projects Allegro to outperform industry peers with a 13% compound annual growth rate (CAGR) in sales and a 46% CAGR in profit-EPS from 2024 to 2027. These forecasts are anchored in the firm's belief that Allegro's product diversification and cost-competitive edge will mitigate near-term headwinds, such as pricing pressures and supply chain constraintsElectric Vehicle Sensor Market Size, Report & Share Analysis 2030^[5].

Market Context: EV Sensor Growth and Competitive Dynamics

The EV sensor market itself is a key growth engine, valued at $10.73 billion in 2025 and projected to reach $22.05 billion by 2030, driven by stricter battery-safety regulations, the proliferation of 800V platforms, and advancements in autonomous drivingElectric Vehicle Sensor Market Surges USD 12.53 Bn in 2025^[6]. Allegro's 0.65% market share in the semiconductor industry places it among the top 21 players in the global current sensor marketAllegro Microsystems Inc Market Share Relative to Competitors^[7], a segment dominated by incumbents like Infineon Technologies and LEM International. However, Allegro's focus on miniaturized, high-accuracy solutions and its strategic acquisitions have enabled it to carve out a niche in high-margin applications such as solar inverters and xEV powertrainsBattery Sensor Market Size, Share & 2030 Growth Trends Report^[8].

The competitive landscape remains fragmented, with intense rivalry from both established players and emerging startups. Yet, Allegro's R&D investments—accounting for over 15% of its annual revenue—have allowed it to maintain a technological edge. For instance, its patented XMR technology offers superior noise immunity compared to traditional Hall-effect sensors, a critical differentiator in high-voltage EV environmentsElectric Vehicle Sensors 2025-2033 Analysis^[9].

Challenges and Mitigants

BofA's optimism is not without caveats. The firm acknowledges risks stemming from the broader EV market's volatility, as highlighted in its “Car Wars” report, which warns of $100+ billion in write-downs by automakers due to delayed adoption and China's oversaturated marketBofA’s ‘Car Wars’ Report Warns of Massive EV Write-Downs^[10]. Additionally, Allegro faces margin pressures from foundry capacity constraints and rising competition in the Hall-effect sensor segmentForecast: 2025 Q3 Automotive Sensor Demand 2023 to 2032^[11].

However, the firm argues that Allegro's diversified product portfolio and strategic partnerships with Tier-1 suppliers (e.g., Bosch, Delphi) provide a buffer against sector-specific downturns. Furthermore, the company's pivot toward industrial and clean energy applications—such as grid-scale battery monitoring—offers a long-term growth runway beyond automotiveElectric Vehicle Sales and Market Share (US - Q3 2025 Updates)^[12].

Conclusion: A Buy for Resilient Growth

Bank of America's upgraded “Buy” rating for ALGM reflects a calculated bet on Allegro's ability to navigate near-term challenges while leveraging secular trends in electrification and automation. With a $38 price target implying a 33% upside, the firm's thesis hinges on Allegro's capacity to sustain its R&D momentum, expand its addressable market, and outperform peers in a sector expected to grow at a 15.49% CAGR through 2030Electric Vehicle EV Sensor Market Report 2025^[13]. For investors, the stock represents a compelling opportunity to gain exposure to the EV sensor boom, albeit with a watchful eye on macroeconomic and industry-specific risks.