Wall Street Rallies Behind Astera Labs as Shares Dip After Earnings Report
Astera Labs (NASDAQ:ALAB) experienced a notable drop in share price, falling 9% early Wednesday following its inaugural quarterly earnings announcement since going public. Despite this initial investor sentiment, several Wall Street analysts are voicing strong support for the semiconductor connectivity specialist, citing its promising future in artificial intelligence (AI) technology.
J.P. Morgan analyst Harlan Sur remains optimistic about Astera Labs’ prospects, forecasting revenue growth into the second half of 2024 and through 2025. This projection leans heavily on anticipated deployments in AI servers, novel platform initiatives, and an increase in the average selling price for the company’s cutting-edge retimer solutions. Additionally, Sur underscores potential growth avenues for Astera through new design wins in ecosystems beyond Nvidia (NVDA), which could significantly bolster its revenue.
“We believe Astera’s strong product cadence will continue to set a high bar for competitors, which drives our confidence that it will sustain a [more than] 80% PCIe retimer market share over the long term,” Sur explained. Reflecting his confidence, he maintains an Overweight rating on Astera’s stock, raising his price target to $95 from $85, buoyed by an anticipated gross margin surpassing initial estimates by approximately 200 basis points.
Similarly, Evercore ISI analyst Mark Lipacis praised Astera’s strategic positioning, particularly highlighting the Aries product’s role in GPU clustering via 7m cables—a feature not previously disclosed. “We think the company has more unannounced product introductions up its sleeve,” Lipacis remarked, spotlighting Astera’s advantage in the rapidly expanding markets for retimers, active electrical cables, and compute express link controllers. Anticipating a revenue bump of $600M over the next five to six years from these sectors, Lipacis maintained an Outperform rating on the stock, adjusting his price target slightly to $98 from $100.
In its latest earnings release, Astera Labs announced an adjusted earnings of $0.10 per share, with a year-over-year revenue increase of 269% amounting to $65.3M for the quarter. Notably, the company reported an adjusted gross margin of 78.2%, with adjusted operating income reaching $15.9M during the same period. With sights set on the upcoming quarter, Astera Labs forecasts revenue growth between 10% to 12% on a sequential basis, targeting adjusted gross margins of around 77% and adjusted earnings of $0.11 per share.
As Astera Labs navigates its first few quarters as a public entity, the backing of Wall Street attests to the company’s solid footing and promising role in the evolving AI landscape. Despite the initial stumble in share price, analysts’ defenses highlight an undercurrent of strong expectation for Astera Lab’s growth trajectory and innovation path.
