Should You Buy, Sell or Hold ADI Stock After a 17.2% YTD Rise?

Analog Devices ADI shares have climbed 17.2% in the year-to-date period, outperforming the Zacks Semiconductor - Analog and Mixed industry’s growth of 12.4%. This outperformance raises the question: Should investors accumulate ADI shares or book profits and exit the investment?

ADI YTD Performance Chart

ADI Benefits From Diversified Growth Across End Markets

Analog Devices is experiencing growth across all of its end markets, including Industrial, Communications, Consumer and Automotive. The Industrial segment is recovering on the back of accelerated growth in subsegments like instrumentation, automation, health care, aerospace and defense and energy management, as mentioned in their earnings call.

Other segments like Communications are growing on the back of robust traction in wireline, data center, and wireless infrastructure supporting AI demand, while the Consumer segment is capitalizing on growing demand for handsets, gaming, hearables, and wearables. The Automotive segment is banking its growth on the Advanced Driver Assistance System, the Electric Vehicle division and in-vehicle infotainment content.

Emerging opportunities, including Industrial automation, which crossed more than $1 billion in business, are now experiencing double-digit growth. Moreover, growing adoption of robotics in logistics, agriculture, and healthcare is also a driving factor for Analog Devices. These factors have helped Analog Devices to deliver a solid performance in its third quarter of fiscal 2025, with revenues reaching $2.88 billion and 25% year-over-year growth.

Analog Devices’ hybrid manufacturing strategy provides a significant competitive advantage by balancing internal production capacity with external partnerships. This approach enhances supply-chain flexibility and reduces geopolitical risk, ensuring consistent product availability for customers. Based on these factors, the Zacks Consensus Estimate for ADI’s fiscal 2025 revenues is pegged at $10.8 billion, indicating 14.8% year-over-year growth.

Analog Devices Benefits From Strong Partnerships

Analog Devices has a solid partner base, which not only enables it to outsource when needed but also acts as a catalyst for technological leadership. Analog Devices is partnered with Teradyne TER, Honeywell International HON and Taiwan Semiconductor Manufacturing Company TSM.

Analog Devices is focusing on reducing supply chain risks while enabling itself to scale production quickly. The company has partnered with TSMC’s subsidiary JASM, which will ensure wafer supply for advanced manufacturing needs, such as wireless BMS and Gigabit Multimedia Serial Link applications.

Analog Devices and Honeywell have signed a memorandum of understanding to digitize commercial buildings without replacing existing wiring, reducing costs and waste while increasing network uptime. Analog Devices will deploy ADI’s single-pair Ethernet (T1L) and software-configurable I/O into Honeywell’s building management systems.

Analog Devices has also partnered with Teradyne to advance its footprint in the robotics market. ADI’s positioning and dynamic motion control systems are enabling Teradyne to develop high-performing cobots and autonomous mobile robots for the logistics industry. These factors will stabilize ADI’s top line and strengthen its earnings. The Zacks Consensus Estimate for ADI’s fiscal 2025 and 2026 earnings is expected to grow 20.5% and 20%, respectively.

Analog Devices Trades at a Premium Valuation

From a valuation standpoint, CYBR trades at a forward price-to-sales ratio of 10.28X, above the industry’s 7.7X.

ADI Forward 12 Month (P/S) Valuation Chart

Conclusion: Buy ADI Stock Now

Although ADI stock trades at a premium valuation, its robust fundamentals, solid revenue growth prospects and strong partner base justify its current valuation. Considering all these factors, we suggest that investors should buy ADI stock right now. ADI flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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