Astera Labs (NASDAQ:ALAB) was in focus on Wednesday as investors reacted negatively to its first quarterly report as a publicly traded company, prompting several Wall Street firms to defend the semiconductor connectivity firm.
Shares fell 9% in early trading.
It’s likely that Astera will continue to grow revenue through the second-half of 2024 and into 2025, aided by “strong” artificial intelligence server deployments, new platform ramps and a rise in the average selling price of next-generation retimer solutions, J.P. Morgan analyst Harlan Sur said.
Astera may also benefit from new design wins for more retimers for the non-Nvidia (NVDA) ecosystem, which could be a “strong revenue growth opportunity,” Sur added.
“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 wrote. He reiterated his Overweight rating and bumped his price target to $95 from $85, noting gross margins are on pace to be roughly 200 basis points higher than expectations.
Evercore ISI analyst Mark Lipacais also praised Astera, especially after company management said its Aries product will play a role in GPU clustering in the back-end via 7m cables, something that was not mentioned during its meetings prior to going public.
“We think the company has more unannounced product introductions up its sleeve,” Lipacis said.
Astera is also reaping benefits from the high-growth retimer market as well as active electrical cable and compute express link controller markets, which should boost revenue by $600M over the next five to six years, Lipacis added. He maintained his Outperform rating and tweaked his price target to $98 from $100.
Financial results, guidance
In its first report since becoming a publicly traded company, Astera said it earned an adjusted $0.10 per share as revenue rose 269% year-over-year to $65.3M.
Adjusted gross margin for the period came in at 78.2% while its adjusted operating income during the period was $15.9M.
Looking ahead to the second-quarter, Astera expects second-quarter revenue to grow between 10% and 12% on a sequential basis, with adjusted gross margins of approximately 77%. Adjusted earnings are forecast to be $0.11 per share.