End Market: Analog Devices derives roughly 50% of sales from the Industrial end market. Therefore, any major uptick/downtick in industrial production could result in upside/downside to our estimates for ADI.
Competition: Any fluctuations in market share between ADI and its competitors could result in risk to our estimates.
M&A: If Analog Devices pursues further acquisitions, it could lead to margin/EPS accretion and result in upside to our estimates.
Inventory risk: Analog Devices sells roughly 55% of its products through distributors. As a result, we believe any major inventory corrections in the distribution channel could result in downside risk to our estimates.
Increased usage of cash: If the Analog Devices decides to rapidly increase its dividend or buyback, we believe those actions could be accretive to earnings.
Macroeconomic: Analog Devices’ geographic exposure spans multiple geographies including the U.S., Europe, and Asia. As a result, any prolonged macroeconomic downturn/upturn could result in downside/upside to our estimates and rating.
If the impact on the company from any of these factors proves to be more negative than we anticipate, the stock will likely have difficulty achieving our financial and price targets. Likewise, if any of these factors proves to have less of an effect than we anticipate, the stock could materially outperform our target.
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