Wall Street analysts praised Astera Labs (ALAB) for its beat-and-raise fourth-quarter report but investors wanted more from the chipmaker. ALAB stock fell on Tuesday.
The Santa Clara, Calif.-based company late Monday reported adjusted earnings of 37 cents a share, up 208% year over year, on sales of $141.1 million, up 179%, in the December quarter.
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For the current quarter, Astera Labs expects adjusted earnings to rise 190% to 29 cents a share with sales increasing 134% to $153 million. That’s based on the midpoint of its guidance.
Despite beating Wall Street’s targets with its Q4 results and outlook, ALAB stock retreated on Tuesday. In midday trades on the stock market today, ALAB stock was down more than 5% at 97.88.
Analysts think investors were disappointed with the company’s gross profit margins. Astera Labs posted a gross margin of 74.1% in Q4 vs. the Street target of 75%. For the March quarter, it expects a gross margin of 74% vs. the Street at 73.5%.
“We model gradually lower (gross margins) over the next several quarters and exiting at 71.5%+ by Q4 ’26,” Evercore ISI analyst Mark Lipacis said in a report.
Also, the company’s revenue growth is decelerating, he said.
ALAB Stock Gets Price-Target Hikes
Lipacis maintained his outperform rating on ALAB stock and increased his price target to 123 from 110.
All told, at least four Wall Street firms raised their price-targets on ALAB stock after the Q4 report.
Astera Labs is benefiting from “an expanding base of customers who are all accelerating their ramps/deployments” of AI data centers, JPMorgan analyst Harlan Sur said in a client note. He reiterated his overweight, or buy, rating on ALAB stock and upped his price target to 130 from 110.
Astera Labs makes semiconductor-based connectivity solutions for artificial intelligence and cloud infrastructure.
ALAB stock is on the IBD Tech Leaders list.
Chip Stocks Rising On Quarterly Reports
Other semiconductor stocks moving on quarterly reports included GlobalFoundries (GFS) and Lattice Semiconductor (LSCC).
Contract chipmaker GlobalFoundries edged above Wall Street’s targets for the fourth quarter but undershot views with its current-quarter outlook. GlobalFoundries has posted seven consecutive quarters of declining earnings on a year-over-year basis as it navigates a cyclical decline in its semiconductor markets. Its revenue has declined for eight straight quarters.
However, GFS stock rose 6.4% to 40.15 in midday trades on Tuesday.
Lattice Semiconductor, a maker of low-power programmable chips, delivered largely in-line results for the fourth quarter with a slight raise to outlook for Q1. Lattice has now reported five straight quarters of declining sales and earnings on a year-over-year basis.
But Lattice flagged early signs of a cyclical recovery in some end markets, such as automotive and communications.
LSCC stock jumped 8.9% to 59.31 in midday trades on Tuesday.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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