Assessing Allegro MicroSystems (ALGM) Valuation After New Power Efficiency Product Launches

Allegro MicroSystems (ALGM) has introduced its ACS37200 current sensor and expanded Power Thru isolated gate driver family, targeting higher efficiency, power density, and simpler designs in electric vehicles, AI data centers, and clean energy systems.

See our latest analysis for Allegro MicroSystems.

These product launches arrive after a period of mixed trading, with a 2.01% 1 day share price return and 1.43% 7 day share price return, set against a 7.91% 30 day share price decline and three year total shareholder return of 13.92% and five year total shareholder return of 10.89%.

If you are tracking how power efficiency themes are playing out beyond Allegro, this could be a useful moment to look at high growth tech and AI stocks as potential companions on your watchlist.

With Allegro MicroSystems trading at US$26.91 and sitting at a discount to analyst targets and some intrinsic value estimates, the real question is whether this reflects an undervalued efficiency play or a market that has already priced in future growth.

Most Popular Narrative: 30% Undervalued

With Allegro MicroSystems last closing at US$26.91 against a narrative fair value of US$38.42, the gap raises clear questions about what assumptions sit underneath that estimate.

Ongoing investments and recent improvements in proprietary manufacturing and test yield (notably in TMR sensor ICs) are translating to cost reductions and enhanced gross margins, which is expected to continue as product differentiation and scale improve, positively impacting net margins.

Read the complete narrative.

Curious how cost efficiencies, margin expansion, and future earnings expectations all feed into that higher value. The narrative leans on specific growth rates, profit targets, and a premium future earnings multiple. Want to see exactly which forecasts need to land for that pricing gap to close.

Result: Fair Value of $38.42 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, that upside view still runs into real questions about heavy dependence on auto demand and rising Chinese competition, which could pressure both growth and margins.

Find out about the key risks to this Allegro MicroSystems narrative.

Another View: Market Pricing Signals Caution

Our DCF model sees Allegro MicroSystems as trading about 7.2% below its fair value of US$28.98. This also points to an undervalued setup but with a much tighter gap than the 30% narrative fair value. That smaller margin of safety raises a simple question: how much risk are you willing to lean into for the extra upside implied by the narrative?

Look into how the SWS DCF model arrives at its fair value.

Build Your Own Allegro MicroSystems Narrative

If you see the story differently or prefer to work straight from the numbers, you can stress test the assumptions and build a custom view in just a few minutes, then Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Allegro MicroSystems.

Looking for more investment ideas?

If Allegro has caught your eye, do not stop here. The next step is lining up a few more high conviction candidates before the market moves without you.

• Spot potential value candidates early by checking out these 876 undervalued stocks based on cash flows, backed by detailed cash flow assessments.
• Chase growth stories in cutting edge technology by scanning these 25 AI penny stocks, which are building AI into their business models.
• Aim for income plus potential upside by reviewing these 14 dividend stocks with yields > 3% that may complement a total return approach.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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