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Analog Devices' Rating Upped by Citi; Target Price Reiterated

Recently, Analog DevicesADI was upgraded to "Buy" from "Neutral" by Citi's analyst Christopher Danely. In addition, he reiterated the price target of $66.00.

Danely remains optimistic about the company's solid business model, increasing margins and profits, high dividend yield and upside from the Apple Inc. AAPL design win.

He believes that the touch technology used in Apple's devices will boost Analog Devices' earnings. According to him, this new design win could be accretive to revenues by 13% and add 36 cents to earnings in 2016. However, this design win could impact margins, thus lowering the company's overall margins to 33.2%.

The analyst also believes that the Apple design win should expand Analog Devices' earnings growth at a compounded annual growth rate (CAGR) of 20%. Additionally, Danely expects the company's earnings to reach $4.50 per share in 2016, up 50% from the 2015 earnings estimate of $3.00.

Moreover, the analyst remains encouraged by Analog Devices' dividend yield of 3%, which is 25% higher than the semiconductor group and 30% more than the S&P 500.

Danely stated that though the demand from the company's industrial and automotive markets appears weak, Analog Devices' new products will continue to witness strong deployment in the communications market, further expanding its share in the sensor market. The analyst believes that the possibility that the company might supply Apple with components for next-generation iPhones and iPads will boost sales in the communications market.

Analog Devices is a leading supplier of analog and digital signal processing (DSP) integrated circuits. Its large customer base provides a distinct competitive edge. We believe that the company's supremacy is driven by its innovative design technology and vast product portfolio.

Currently, Analog Devices has a Zacks Rank #2 (Buy). A couple of well-ranked stocks in the same sector are Inphi Corporation IPHI and MaxLinear, Inc. MXL . While Inphi sports a Zacks Rank #1 (Strong Buy), MaxLinear has the same Zacks Rank as Analog Devices.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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