Buy Or Sell Analog Devices Ahead Of Earnings?
The Analog Devices, Inc. (ADI) logo appears on a smartphone screen in this illustration photo in ... More Reno, United States, on December 17, 2024. (Photo by Jaque Silva/NurPhoto via Getty Images)
Analog Devices (NASDAQ:ADI) is scheduled to announce its Q2 FY'25 (April 2025) earnings on Thursday, May 22. The consensus estimates revenues of $2.51 billion for the quarter, reflecting a 16% increase year-over-year, while earnings are anticipated to be approximately $1.70 per share, up from $1.40 in the same period last year. The semiconductor cycle seems to be recovering, and Analog may experience increased demand from the industrial and automotive sectors, alongside a higher demand from data centers. Gross margins could also see improvement due to better volumes and alleviated inventory concerns.
The company currently has a market capitalization of $113 billion. Revenue for the past twelve months stood at $9.3 billion, and it was operationally profitable with $2.0 billion in operating profits and net income of $1.6 billion. However, if you're looking for upside potential with lower volatility than individual stocks, the Trefis High Quality portfolio offers an alternative, having outperformed the S&P 500 and generated returns over 91% since its inception.
See earnings reaction history of all stocks
Here are some insights on one-day (1D) post-earnings returns:
Additional statistics for observed 5-Day (5D) and 21-Day (21D) returns following earnings are summarized in the table below.
This indicates that the stock has a slightly higher likelihood of a positive move after earnings. Nonetheless, stocks can decline significantly – 20%, 30%, even 50% –as demonstrated during previous market shocks. No stock is exempt. How low can ADI stock drop in a market crash? It's important to stay updated.
ADI 1D, 5D, 21D Post Earnings Forward Returns
A relatively less risky approach (though it may not be beneficial if the correlation is weak) is to analyze the correlation between short-term and medium-term returns following earnings, identify a pair that demonstrates the highest correlation, and carry out the corresponding trade. For instance, if 1D and 5D exhibit the highest correlation, a trader could take a 'long' position for the next 5 days if the 1D post-earnings return is positive. Here is some correlation data drawn from both a 5-year and a 3-year (more recent) timeframe. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and the subsequent 5D returns.
ADI Correlation Post Earnings Forward Returns
At times, the performance of peers can impact the stock's reaction after earnings. Indeed, the pricing may commence ahead of the earnings announcement. Below is some historical data on the past post-earnings performance of Analog Devices stock compared to the performance of peers that reported earnings just prior to Analog Devices. For a fair comparison, peer stock returns also represent post-earnings one-day (1D) returns.
ADI Correlation with Peer Returns
Discover more about Trefis RV strategy that has outperformed its all-cap stocks benchmark (which includes all three: the S&P 500, S&P mid-cap, and Russell 2000), generating strong returns for investors. Additionally, if you're seeking upside with a more stable experience than an individual stock like Analog Devices, consider the High Quality portfolio, which has surpassed the S&P and achieved returns greater than 91% since inception.
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