Pro Analysis

Analog Devices to fall more than 10% due to its high valuation, analyst says

Analog devices
Source: Analog Devices

Instinet lowered its rating on Analog Devices to reduce from neutral, saying the company's earnings will come in below expectations next year.

"The Street seems enamored by the quality of ADI's franchise. Specifically, its core end-market exposure (industrial, automotive, medical, and infrastructure), profit margins (top 5 percent of the S&P 500), and potential revenue and expense synergies associated with Linear Technology [acquisition]," analyst Romit Shah wrote in a note to clients Friday. "We see the bullish sentiment reflected in share performance, which has outpaced the major indices (Nasdaq, S&P 500) over the last 12 months. … We agree that Analog Devices is a high-quality franchise; however, the stock appears overvalued."

Analog Devices shares are up 40 percent in the past 12 months compared with the S&P 500's 16 percent return through Thursday.