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Analog Devices Plans to Acquire Maxim, Stock Rises

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Analog Devices (NASDAQ:ADI) stock rose 2.6% in pre-market trading at 7:33 AM ET today. The stock rose on reports that the company agreed to acquire Maxim Integrated Products (NASDAQ:MXIM) for $21 billion in an all-stock deal. The combined company will likely have an enterprise value of nearly $68 billion. The deal should close next year.

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 According to a MarketWatch report, “The deal will strengthen ADI as an analog semiconductor leader with increased breadth and scale across multiple attractive end markets.” The report also said, “Under the terms of the deal, Maxim shareholders will receive 63 cents of ADI common stock for each share owned. ADI shareholders will own 69% of the new entity, while Maxim shareholders own the remaining 31%.”

Analog Devices’ current market capitalization is about $45.9 billion, while Maxim’s market capitalization is about $17.1 billion. However, the combined entity would still be behind Texas Instruments (NASDAQ:TXN), which has a market capitalization of $119.8 billion.

Maxim Integrated Products stock also rose 18.3% in pre-market trading at 8:00 AM ET today.

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Growth projections for Analog Devices

In the second quarter of fiscal 2020 (quarter ended May 2), Analog Devices reported an adjusted EPS of $1.08 compared to $1.36 in the same quarter a year ago. The adjusted EPS beat analysts’ consensus expectation of $1.03. Analog Devices generated sales of $1.3 billion—a decline of 13.8% from the second quarter of fiscal 2019. The semiconductor company missed analysts’ consensus sales expectation of $1.33 billion.

Wall Street analysts expect Analog Devices to report an adjusted EPS of $1.08 on revenue of $1.32 billion in the third quarter. Analysts also expect the company’s sales to fall by 12.0% YoY (year-over-year) in fiscal 2020 to $5.3 billion. The sales could increase by 8.3% YoY to $5.7 billion in fiscal 2021. Meanwhile, the adjusted earnings will likely decline from $5.15 per share in fiscal 2019 to $4.27 per share in fiscal 2020. Analysts expect an adjusted EPS of $5.01 in fiscal 2021.

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Analysts’ recommendations and target price

Among the 25 analysts tracking Analog Devices stock, 18 recommend a “buy,” while seven recommend a “hold.” None of the analysts recommend a “sell.” Wall Street analysts’ mean 12-month target price on the stock is $130.29, which implies a 4.7% gain from the current level of $124.50. The consensus 12-month target price for the stock has risen from $127.19 in June—a growth of 2.4%.

Stock returns

On July 10, Analog Devices stock gained 0.2% and closed at $124.50. The stock is trading 2.3% below its 52-week high of $127.39 and 57.5% above its 52-week low of $79.08. The stock has risen by about 4.8% year-to-date.

Based on the closing price on July 10, Analog Devices stock was trading 2.6% above its 20-day moving average of $121.37. The stock is also trading 7.6% above its 50-day moving average of $115.68 and 15.1% above its 100-day moving average of $108.16.

Analog Devices stock has a lower Bollinger Band level of $117.36, while its middle Bollinger Band level is $121.37. On July 10, the stock closed near its upper Bollinger Band level of $125.38, which suggests that the stock is overbought.

At 8:39 AM ET today, the S&P futures rose 0.65%, while the Dow futures rose 0.70%. Read Worried about a US Stock Market Crash? So Is Everyone! to learn more.

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