Analog Devices, Inc. (NASDAQ:ADI) — Analog Devices manufactures high-performance integrated circuits for analog and digital processing applications and benefits from the continuous growth of its industrial and automotive segments. Those areas accounted for 53% of the fiscal October quarter’s revenues.
Analysts are growing very optimistic that ADI’s pending acquisition of Linear Technology Corporation (NASDAQ:LLTC) will increase its market share and margins. Standard & Poor’s notes that there are $150 million in annualized synergies, that management has done a good job of optimizing the core of their business and that the acquisition will result in improving operating leverage.
Fiscal year 2016 (October) was reported at $2.76. As a result of better-than-expected FQ3 earnings, S&P raised their FY 2017 estimate to $3.39 from $3.29. ADI raised their dividend in March to $1.68 annually for a dividend yield of 2.4% and expressed the intent of returning 80% of its free cash flow through dividends and share repurchases. S&P increased their 12-month target to $82, up from $71.
Technically, ADI stock broke major resistance in July as it sliced through its 50- and 200-day moving averages, then consolidated between $62 and $66. The consolidation formed a quadruple top, which was broken in November with a bullish step-up, the second phase of which opened a gap from about $69 to $73.
The formation topped with a seven flat highs, all at $74, and then fell, closing the open gap. It appears that support at the 20-day moving average (green line) is holding, thus providing an area in which to enter new positions. Buy ADI at $70 with a trading target of $82 for a proposed gain of 17%.