Astera Labs' Stock Plunge: What Happened?

Astera Labs (NASDAQ: ALAB) stock experienced a significant pullback last week, with the share price declining by 15.4% from the previous market close as of 10 a.m. ET on February 17, 2025. This drop occurred despite the company reporting sales and earnings for the fourth quarter that beat Wall Street's expectations. This article aims to explore the factors contributing to this stock price decline and provide insights into the company's growth prospects.

Astera Labs reported non-GAAP (adjusted) earnings per share of $0.37 on revenue of $141.1 million in the fourth quarter. For comparison, the average Wall Street estimate had called for the business to post adjusted earnings per share of $0.26 on revenue of $127.2 million. Sales were up roughly 179% year over year in the period, and the company reported a gross margin of 74%. While the gross margin figure was down from the margin of 77.3% posted by the business in the prior-year quarter, it was still a strong performance.

However, some investors may have been concerned by the margin decline, and the overall performance picture for the quarter was impressive. Management also issued encouraging guidance for the current quarter, with the company expecting sales to be between $151 million and $155 million. If sales were to hit the midpoint of that target range, it would work out to year-over-year growth of roughly 134%. The company expects its GAAP and adjusted gross margins to come in at approximately 74%, and adjusted earnings per share for the period are projected to be between $0.28 and $0.29.



Despite the strong quarterly results and positive guidance, Astera Labs' stock sold off because some investors didn't think the results were strong enough to justify the company's valuation. Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free » Astera Labs stock slumps on Q4 results Astera Labs posted non-GAAP (adjusted) earnings per share of $0.37 on revenue of $141.1 million in the fourth quarter. For comparison, the average Wall Street estimate had called for the business to post adjusted earnings per share of $0.26 on revenue of $127.2 million. Sales were up roughly 179% year over year in the period, and the company reported a gross margin of 74%. While the gross margin figure was down from the margin of 77.3% posted by the business in the prior-year quarter, it was still a strong performance.



The average analyst rating for Astera Labs stock from 12 stock analysts is "Strong Buy." This means that analysts believe this stock is likely to perform very well in the near future and significantly outperform the market. The average target price is $113.67, which represents an increase of 29.39% from the current stock price of $87.85. This indicates that analysts expect the stock to rebound and continue its upward trend in the long term.

In conclusion, Astera Labs' stock price decline last week was likely due to investor concerns about the company's valuation and the perceived strength of its quarterly results. Despite the pullback, analysts maintain a strong buy rating for the stock, with an average target price of $113.67, indicating a potential increase of 29.39% from the current stock price. Investors should consider buying the stock on this week's pullback, as the company's strong financial performance and positive guidance suggest a promising outlook for the future.