Allegro MicroSystems Set to Thrive in Reindustrialization Movement

Allegro MicroSystems is poised for secular growth due to the reindustrialization movement. The company has diversified across geographies, minimizing the impact of US tariff policies. Automotive and Industrial & Other segments are returning to year-over-year top-line growth. Recent trade deals will further boost Allegro's prospects.

Allegro MicroSystems (NASDAQ: ALGM) is poised for secular growth, driven by the reindustrialization movement, according to recent financial reports and market analysis. The company's diversification across geographies has minimized the impact of U.S. tariff policies, allowing it to maintain a strong position in key markets.

The Automotive and Industrial & Other segments, which constitute a significant portion of ALGM's revenue, have returned to year-over-year top-line growth. This growth is particularly notable in the Industrial & Other segment, which has been experiencing a ramp-up period since Q1 2025. The company has made substantial headway in Q1 2025, with both market segments showing sequential growth compared to the previous year's quarter [1].

ALGM's recent announcements, such as the release of its next-generation sensor, ASIL-C, and its first U-core current sensor ICs, further underscore its commitment to innovation and growth. These products are designed to meet the safety and efficiency needs for commercial xEV inverters for hybrid and battery-electric vehicles, positioning ALGM well for the growing e-Mobility market.

The U.S. EV market, which accounts for roughly 15% of ALGM's sales, is expected to moderate in growth due to the expiration of EV tax credits at the end of September 2025. However, the company is well-positioned to lean into international markets, particularly in China, where EV demand remains strong. Additionally, the Industrial & Other market segment will be driven by data center growth, industrial automation, and robotics, as well as the clean energy industry [1].

Recent trade deals with the EU and Japan have secured $1.15 trillion in aggregate investments for reindustrialization across multiple markets, including semiconductors, energy, and pharmaceuticals. This investment cycle is expected to involve industrial automation and robotics, providing a significant growth opportunity for ALGM [1].

ALGM's financial position is also robust. The company closed Q1 2026 with $129 million in cash and equivalent and $312 million in debt, resulting in a leverage ratio of 1.36x net debt/aEBITDA. Management is expected to continue reinvesting in R&D and consider additional M&A activity to expand into high-growth markets [1].

Given these factors, ALGM shares are expected to be priced at $34.88 at 24x eFY27 EV/aEBITDA, with an upgrade to a "Buy" rating. The recent pullback in share price presents an opportunity for investors to add or build a position in ALGM shares, positioning for the next upcycle in growth [1].

References:

[1] https://seekingalpha.com/article/4814970-allegro-microsystems-set-for-secular-growth-in-the-reindustrialization-movement