Allegro MicroSystems has strong earnings, fat margins, Barron’s says

Wall Street seems of two minds about Allegro MicroSystems, a New England-based chip maker whose sales to the auto industry have risen fast, Bill Alpert writes in this week’s edition of Barron’s. Allegro stock shot up 150% to a July peak above $50, before easing back to a recent $38. Even after its retreat, the company’s stock fetches 37 times its operating earnings in the latest fiscal year-about twice the multiple of the S&P 500. All but one of the half dozen brokerage firms covering the stock rate it a Buy, arguing that Allegro’s lead in magnetic sensor chips will lift the stock by 45%. But a number of buyside investors aren’t convinced Allegro’s growth and exceptional profit margins can last. They’ve joined the 8% of Allegro’s float that’s short, in a bet that the stock will drop, the author says.