Needham has raised its price target on Allegro MicroSystems (NASDAQ:ALGM) to $41.00, up from $37.00, and kept a Buy rating on the shares. The stock was trading at $37.37, a notable rise from the prior close of $32.66 and approaching Needham's revised target.
The firm's decision came after Allegro reported quarterly results that topped consensus on both revenue and earnings per share, with gains driven by momentum in Automotive and Data Center end markets. Market data shows six analysts have recently increased their earnings forecasts for the company, reflecting growing confidence in the near-term outlook.
Needham pointed to several operational indicators behind its more bullish valuation. Bookings and backlog rose to multi-quarter highs, suggesting improving demand visibility. The analyst also described the pricing backdrop for calendar year 2026 as more benign than previously expected, forecasting only a "very low" single-digit percentage decline in prices for that period. Those assumptions align with InvestingPro projections that forecast 19% revenue growth for fiscal 2026.
Performance in specific growth areas reinforced the outlook. E-Mobility sales expanded 46% year-over-year, while Data Center revenue climbed 31% quarter-over-quarter and now accounts for 10% of total company sales. Those trends have supported strong investor returns: ALGM has delivered a 51.2% price return over the past 12 months.
Needham's new $41 target is derived from a 35x multiple applied to its calendar year 2027 non-GAAP EPS estimate of $1.18. The firm also cautioned that operating expenses were higher than expected in fiscal third and fourth quarters of 2026 due to variable compensation and a payroll tax reset, which elevated near-term cost assumptions.
Although Allegro was not profitable over the last twelve months, InvestingPro analysis indicates the company is expected to achieve profitability this year. Needham and other analysts appear to be incorporating that trajectory into updated estimates and valuations.
Additional detail from the quarter shows Allegro beat consensus EPS and revenue figures. The company reported EPS of $0.15 against an expected $0.14, a 7.14% positive surprise. Revenue came in at $229.21 million, above the anticipated $220.79 million. Those results prompted a meaningful pre-market reaction in the stock, while broader market commentary has emphasized the company’s ability to meet or exceed expectations.
No recent analyst changes in terms of upgrades or downgrades were reported, but the earnings beat and the subsequent increase in Needham's target reflect a constructive reception from the analyst community.
Taken together, the upward revision of the price target, stronger bookings and backlog, improved near-term pricing expectations, and above-consensus quarterly results provide the basis for Needham's more optimistic stance on Allegro. Investors will monitor how operating expense dynamics in fiscal 2026 evolve and whether the company continues to convert demand momentum into sustained profitability.
Key takeaways:
- Needham raised its price target to $41 while maintaining a Buy rating.
- Quarterly results beat estimates: EPS $0.15 vs $0.14 expected; revenue $229.21M vs $220.79M expected.
- Bookings and backlog at multi-quarter highs; InvestingPro forecasts 19% revenue growth for fiscal 2026.