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Understanding Analog Devices’ Risk factors

Analog Devices (ADI) is a U.S.-based semiconductor manufacturer of analog, mixed-signal, and digital signal processing integrated circuits (ICs) for use in electronic devices.

The company recently released its fiscal first-quarter financial results. Overall revenues increased 72% year-over-year to $2.68 billion. Furthermore, diluted adjusted profits per share increased 35% year-to-year to $1.94 per share.

ADI forecasts Q2 sales to be in the range of $2.7-$2.9 billion, based on current business momentum. Adjusted profits for the second quarter are expected to fall between $1.97 and $2.17 per share.

Let’s look at the risk factors for Analog Devices using the new Tipranks Risk Factors tool.

Risk Factors

Analog Devices’ main risk category is Finance & Corporate, which accounts for 8 of the total 27 risks identified. In its recent report, the organization warned investors about one new risk.

The new risk factor added by Analog Devices is in the Finance & Corporate category.

Analog Devices emphasizes that the company’s balance sheet remains highly leveraged. It informs investors that the business has roughly $6.3 billion in debt as of January 29, 2022, with $2.5 billion available under an unsecured revolving credit facility. Analog Devices warns investors that such a high level of debt has several negative consequences. It might make it more difficult for the firm to raise funds, make acquisitions, or introduce new products. Furthermore, the corporation warns that failure to settle the interest or debt on time might have severe consequences on its financial performance. Furthermore, if the credit agencies downgrade the company’s credit ratings, the interest rate on borrowings may rise, limiting the company’s capacity to secure additional funding.

Wall Street’s Take

Following the fiscal Q1 earnings release, Needham analyst Quinn Bolton maintained a Buy rating and a price target of $205 per share.

Bolton writes, “Through organic development and strategic acquisitions, we believe Analog Devices has built the preeminent franchise in precision analog semiconductors, one of the most attractive segments in the entire semiconductor industry.”

Turning to Wall Street, the stock has a Strong Buy consensus rating based on 15 Buys and 3 Holds. The average ADI price target of $206.39 implies 28.7% upside potential to current levels.

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