Allegro Microsystems, Inc. (ALGM)

Price$36.61Cached quoteAs of 2026-09-05 14:25 UTC

AI: Overvalued

Price checkThe shares still look expensive because the market price assumes a large jump in lasting cash profits.

At the observed quote, Allegro’s roughly $7.0 billion equity value is about 80 times trailing free cash flow, meaning cash left after operations and capital spending. Trailing free cash flow is about $88 million, while trailing revenue is about $946 million and net income about $14 million. Enterprise value, which adds net debt to the stock market value, is roughly 7.5 times sales. Even granting management’s long-term goal of free cash flow above 25% of sales immediately, the shares would still cost about 30 times that cash flow. That is too demanding for a value entry.

Big pictureSales are rebounding fast, but recent history shows the recovery still sits inside a sharp chip cycle.

Revenue fell from about $1.05 billion in fiscal 2024 to $725 million in fiscal 2025, then rebounded to $890 million in fiscal 2026. The latest quarter rose 27.5% year over year, with gross margin, the share of sales left after product costs, improving to 48.5% from 44.9%. Cash generation is less steady: free cash flow was about $125 million in fiscal 2026 but only $14 million in the latest quarter versus $51 million a year earlier. The recovery is real, but not yet proven durable through a full cycle.

Business strengthThe balance sheet is improving, but past buybacks added debt and stock pay still dilutes owners.

Liquidity is strong: current assets were about $508 million against $137 million of current liabilities, while cash was $162 million and total debt $287 million. Debt is down about 17% from fiscal 2025. Capital allocation is mixed. The 2024 Sanken transaction retired 38.8 million shares, but it was funded partly by issuing 28.75 million new shares and by a $400 million term loan. Shares outstanding are now about 0.7% higher than a year ago, and trailing stock compensation of roughly $51 million equals about 58% of trailing free cash flow.

What could change the storyThe valuation becomes reasonable only if new markets keep growing and margins move much closer to management’s goals.

The bull case is visible: data center reached 17% of quarterly sales, industrial and other revenue grew 58.8%, and second-quarter guidance implies 26% sales growth with adjusted gross margin around 51%. Management’s long-term model targets low-double-digit sales growth, gross margin above 58%, operating margin above 32%, and free cash flow above 25% of sales. The bear case is that those targets remain far away. With 12% annual sales growth for three years and a 25% cash margin, today’s equity value would still equal about 21 times that future cash flow before discounting.

AI: News

Strong first-quarter reboundSales and profits beat expectations, while stronger guidance showed the recovery was spreading beyond automotive.

On July 30, Allegro reported quarterly sales of $259.2 million, up 27.5% year over year, and adjusted earnings, which exclude selected non-cash and unusual items, of $0.23 per share versus roughly $0.21 expected. Data center reached 17% of sales, while automotive sales rose 14.6%. Management guided the next quarter to $265 million-$275 million of sales, about 26% growth at the midpoint. Shares nevertheless fell about 1.8% that session, suggesting expectations were already high; the price move alone does not prove investors disliked the results.

Analyst targets resetSeveral analysts kept positive ratings but cut targets, showing that strong growth no longer supported peak expectations.

After the July 30 report, TD Cowen kept a Buy rating but cut its target from $66 to $48, while Mizuho kept its positive rating and reduced its target from $67 to $58. Morgan Stanley moved its target only slightly higher, from $51 to $52. These changes did not create a clean one-day stock reaction, but they matter because professional forecasts were being marked down even after a strong quarter, reinforcing the risk that valuation had moved ahead of fundamentals.

Sector shock hits sharesA broad chip selloff produced the largest recent daily drop, without a matching company-specific fundamental release.

On August 18, Allegro fell about 11% as several semiconductor shares sold off. Contemporary reporting pointed to a 19-year high in the 30-year U.S. Treasury yield and elevated oil prices as investors reassessed richly valued chip stocks. Allegro had no comparable earnings or product announcement that day, so attribution is uncertain. The mechanism still matters: higher long-term interest rates reduce what investors are willing to pay today for profits expected many years ahead, which especially pressures high-multiple growth shares.

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Revenue

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2026

Net income

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2026

Free cash flow

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Total cash / debt

CashTotal debt

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Financial statements

	2026	2025	2024	2023	2022	2021	2020
Revenue	$890.1M	$725.0M	$1.05B	$973.7M	$768.7M	$591.2M	$650.1M
Gross profit	$412.0M	$321.5M	$574.5M	$546.1M	$407.5M	$278.9M	$261.3M
Gross margin	46.28%	44.35%	54.75%	56.09%	53.01%	47.18%	40.19%
Research & development	$205.8M	$179.6M	$176.6M	$150.8M	$121.9M	$108.6M	$102.1M
Operating expenses	$393.5M	$341.3M	$378.3M	$342.8M	$270.8M	$266.7M	$208.4M
Operating income	$18.5M	−$19.8M	$196.2M	$203.3M	$136.7M	$12.2M	$52.8M
Operating margin	2.08%	−2.73%	18.70%	20.88%	17.78%	2.06%	8.13%
EBITDA	$86.1M	$44.7M	$267.6M	$254.1M	$185.2M	$60.5M	$116.9M
EBITDA margin	9.67%	6.17%	25.50%	26.10%	24.09%	10.23%	17.98%
Net income	−$14.9M	−$73.0M	$152.7M	$187.4M	$119.4M	$18.0M	$37.0M
Net profit margin	−1.67%	−10.07%	14.55%	19.24%	15.53%	3.04%	5.69%
Basic EPSper basic share	-$0.08	-$0.39	$0.79	$0.98	$0.63	$0.22	$3.70
Diluted EPSper diluted share	-$0.08	-$0.39	$0.78	$0.97	$0.62	$0.10	$3.70

Review official source filings ↗

Owners

Reported shareholders

Reference date Jun 30, 2026

≈32.06%of listed shares

Sanken Electric Co., Ltd.59.73M shares · Aug 7, 2024

View holders

Top 20 reported holders of ALGM
Holder	% owned
Sanken Electric Co., Ltd.	≈32.06%59.73M shares
FMR LLC	≈13.73%25.58M shares
BlackRock, Inc.	≈7.45%13.89M shares
Invesco Ltd.	≈7.34%13.68M shares
JPMORGAN CHASE & CO	≈6.83%12.72M shares
Capital Research Global Investors	≈6.44%12.01M shares
VANGUARD PORTFOLIO MANAGEMENT LLC	≈4.12%7.67M shares
STATE STREET CORP	≈3.05%5.68M shares
VANGUARD CAPITAL MANAGEMENT LLC	≈2.96%5.51M shares
PRICE T ROWE ASSOCIATES INC /MD/	≈1.99%3.71M shares
Clearbridge Investments, LLC	≈1.58%2.95M shares
GEODE CAPITAL MANAGEMENT, LLC	≈1.42%2.64M shares
DIMENSIONAL FUND ADVISORS LP	≈1.14%2.12M shares
MORGAN STANLEY	≈0.97%1.81M shares
LOOMIS SAYLES & CO L P	≈0.87%1.62M shares
GOLDMAN SACHS GROUP INC	≈0.85%1.58M shares
PRINCIPAL FINANCIAL GROUP INC	≈0.80%1.49M shares
MASSACHUSETTS FINANCIAL SERVICES CO /MA/	≈0.77%1.44M shares
CHARLES SCHWAB INVESTMENT MANAGEMENT INC	≈0.73%1.36M shares
NORGES BANK	≈0.70%1.29M shares

Percentages use 186.32M shares of this listed class outstanding on Jun 26, 2026. ≈ compares the latest reported holding with a share total from a different date; it is not a confirmed current stake.

Gray completes the 100% scale. Reported positions may overlap; holders have different reporting dates.

Source: SEC Form 4 ↗Updated Sep 29, 2026 · Quarterly data

Insider buys & sells

Jul 1, 2024–Jun 30, 2026

Buys3$384.4K disclosed value

Sells (SEC code S)18$903.86M disclosed value

Transaction	Insider	Type	Shares	Price	Value	Owned after
Jun 3, 2026Form 4	Madormo RichardSVP, Worldwide Sales	SellCommon Stock	5.0K	$52.72	$263.6K	69.7K
May 22, 2026Form 4	Coleman TroySVP, General Manager, Products	SellCommon Stock	4.5K	$45.72	$205.7K	77.5K
May 21, 2026Form 4	Webster Roald GrahamVP, Chief Accounting Officer	SellCommon Stock	5.2K	$44.89	$234.2K	13.1K
May 18, 2026Form 4	Kent IanSVP, Global Operations	SellCommon Stock	2.6K	$41.56	$109.8K	25.4K
May 14, 2026Form 4	Lynch Susan DDirector	SellCommon Stock	16.7K	$45.46	$759.7K	12.8K