TLDR
- Northland upgraded ALAB to Outperform with a $350 price target, sending the stock up 5.4% in pre-market trading
- Q2 revenue hit a record $392.4 million, up 104% year-over-year, beating consensus of ~$360 million
- Non-GAAP EPS of $0.80 beat estimates by $0.11
- Amazon bought 277,777 ALAB stock valued at ~$134 million in Q2, making it the 4th largest holding in its portfolio
- Management guided for ~40% sequential revenue growth in Q3
Astera Labs stock jumped 5.4% in pre-market trading on Monday after Northland upgraded the AI connectivity chip maker to Outperform from Market Perform, setting a $350 price target.
Astera Labs, Inc. Common Stock, ALAB
The stock opened at $321.61, well off its 52-week high of $499.48 but a long way from its 52-week low of $97.89. The move came against a mostly flat broader market, with the Nasdaq up 0.5% while the S&P 500 and Dow were essentially unchanged.
Northland’s call pointed to expectations for positive earnings revisions and an AI infrastructure spending cycle it now views as more durable than previously modeled.
The upgrade follows a strong second quarter. Astera posted record revenue of $392.4 million for Q2, up 104% year-over-year and above the roughly $360 million analyst consensus. Non-GAAP EPS came in at $0.80, beating estimates by $0.11.
Management then guided for approximately 40% sequential revenue growth in Q3, a number that triggered a wave of price target hikes from Citi, Jefferies, and Morgan Stanley in early August.
Northland had already raised its Q3 EPS estimates after the print before issuing Monday’s full upgrade.
Amazon Takes a $134 Million Stake
Adding fuel to the rally, new SEC filings revealed Amazon bought 277,777 ALAB stock during Q2, valued at approximately $134.2 million. The position now makes up 3.0% of Amazon’s investment portfolio, ranking it as the 4th largest holding.
Institutional interest more broadly is high. Hedge funds and institutional investors now own 60.47% of ALAB stock.
Other firms also added positions in Q2, including Trifecta Capital Advisors, which took a new stake worth $79,000, and CX Institutional, which grew its holding by over 1,300%.
Analyst Targets Keep Rising
The analyst community has been broadly bullish. Stifel Nicolaus raised its price target from $260 to $460 with a Buy rating in late June. JPMorgan lifted its target from $205 to $280 with an Overweight rating. UBS held a Neutral rating with a $425 target. Zacks upgraded ALAB to Strong Buy on August 11.
The consensus price target across all analysts now sits at $325.25, with 13 Buy ratings, 1 Strong Buy, and 9 Hold ratings.
Northland also flagged Astera’s potential to grow content per rack and capture more switching fabric across both scale-up and scale-out AI deployments as key longer-term drivers.
For the current fiscal year, analysts as a group forecast Astera Labs to post $2.70 EPS.
The company reported a return on equity of 19.24% and a net margin of 30.74% for Q2. Its 50-day moving average stands at $358, while the 200-day sits at $240.74.
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