Stock Analysis | Analog Devices Outlook - A Weak Technical Picture Amid Mixed Analyst Signals

Market Snapshot

Takeaway: Analog Devices (ADI) is showing a weak technical outlook, with a current price drop of 0.34% and bearish signals dominating the chart. Our internal diagnostic score is just 2.68 out of 10 — a sign to be cautious.

News Highlights

• McKinsey on Semiconductors and Tariffs: Recent research from McKinsey highlights potential U.S. tariffs' effects on chip supply chains, emphasizing how trade policy can impact Analog Devices and its peers in a volatile market.
• Japan-U.S. Semiconductor Collaboration: Japan is pushing for enhanced cooperation with the U.S. in rare earths and semiconductors, potentially helping counter China's influence and reduce trade imbalances. This could benefit ADI in the long term if supply chain diversification accelerates.
• Indie Semiconductor's Poor ROIC: A negative ROIC of -18.68% for indie Semiconductor highlights broader competitive challenges in the chip industry. While not directly linked to ADI, it signals the importance of financial health in a tough sector.

Analyst Views & Fundamentals

Analysts are divided on Analog Devices. The simple average rating is 3.60, while the performance-weighted rating is lower at 2.00. This indicates that some firms historically haven't performed well with their ADI calls, dragging down the overall confidence.

• Rating Consistency: Analyst ratings vary, with five "Neutral," one "Strong Buy," and four "Buy" calls. The dispersion suggests mixed expectations about ADI's near-term performance.
• Price Trend Mismatch: The stock is currently down 0.34%, while the average analyst rating is neutral to positive. This suggests market skepticism, possibly due to technical headwinds and bearish signals.

Key Fundamental Factors

• Net Profit Attributable to Parent Company Shareholders / Net Profit: 100.00%, with an internal diagnostic score of 1.00. Suggests a clean profit allocation, though low score hints at limited predictive value.
• Interest Coverage Ratio: 11.13%, with an internal diagnostic score of 2.00. Healthy coverage, but not a strong indicator for the model.
• Net Operating Profit Margin (NPM): 21.58%, with an internal diagnostic score of 1.00. High margin, but again, limited model weight.
• Net Profit Attributable to Parent Company Shareholders (YoY Growth Rate): 25.64%, with an internal diagnostic score of 2.00. Positive growth, though not highly predictive in our model.
• Net Cash Flow from Operating Activities per Share (YoY Growth Rate): -97.65%, with an internal diagnostic score of 1.00. Sharp decline in operating cash flow suggests caution.

Money-Flow Trends

Analog Devices is attracting attention from big-money players. The fund-flow score is 7.75 (out of 10), indicating positive inflows across all major categories:

• Large-Institution Flows: 49.14% inflow ratio, with a negative trend — suggesting some caution from large players.
• Extra-Large Flows: 52.09% inflow ratio, with a positive trend, indicating institutional strength.
• Overall Inflow Ratio: 51.33%, suggesting a net inflow of capital into ADI — a positive sign despite the weak technical backdrop.

Key Technical Signals

Analog Devices has a technical score of 2.68 (on a 0-10 scale), indicating a weak chart with more bearish than bullish signals.

Internal Diagnostic Scores by Indicator:

• WR Overbought: 2.00 — neutral bias, historically modest returns of 15.00% on average with a 42.86% win rate.
• RSI Overbought: 1.00 — biased bearish, with an average loss of -1.44% and a win rate of 23.53%.
• Bearish Engulfing: 7.94 — bullish bias, with positive average returns of 1.35% and a strong win rate of 75.00%.
• Ex-Dividend Date: 1.22 — bearish bias, with modest negative returns (-0.36%) and a 33.33% win rate.
• Dividend Record Date: 1.22 — also bearish, with similar weak performance.

Recent Chart Activity:

• August 26: WR Overbought and RSI Overbought signals — both weak and bearish.
• August 28: Bearish Engulfing appeared — the only strong bullish signal recently.
• September 2: Ex-Dividend Date and Dividend Record Date — both bearish calendar-related signals.

Momentum Summary:

With four bearish signals and one bullish one, the momentum is clearly on the downside. Our technical model recommends avoiding the stock for now due to the weak trend and lack of support in the key indicators.

Conclusion

Analog Devices is in a tricky spot: while fundamentals like profit margins and cash flow show strength, the technical picture is weak and analysts are divided. The internal diagnostic score of 2.68 suggests caution. Given the bearish technical signals and mixed analyst sentiment, we recommend considering waiting for a pull-back or clearer momentum reversal before considering entry. Investors should also keep an eye on upcoming earnings and key industry developments as part of their due diligence.