Value
4.1/10data confidence 67%| Component | Sub-score |
|---|---|
| P/S | 2.3 |
| Fwd P/E | 2.9 |
| PEG | 10.0 |
| Analyst target | 3.0 |
- ▸Forward P/E: 37.6x
- ▸PEG: 0.02
ALGM · Why this verdict
Why Allegro MicroSystems (ALGM) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.1/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Allegro MicroSystems has posted 26% year-over-year revenue growth with a 9 out of 9 Piotroski financial health score, but the stock has climbed above the analyst consensus price target, leaving no upside buffer and a negative reward-to-risk ratio; concentrated exposure to automotive OEM customers (70.6% of revenues) and high short interest at 12% against 131% implied volatility create a setup that warrants avoiding new entry until a positive reward-to-risk spread re-opens.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Revenue has expanded 26% year-over-year, and the company scores a near-perfect 9 out of 9 on the Piotroski financial health index, signaling broad-based balance-sheet strength across profitability, leverage, and operating efficiency dimensions. Growth breakdown | Revenue growth should remain above 15% year-over-year for two consecutive quarters, and the Piotroski score should stay at 8 or above over the next 12 months. | →Stable |
| CounterGrowth is concentrated in automotive OEM supply chain customers, which represent 70.6% of revenues; any production slowdown or inventory correction within that customer base could rapidly compress the headline growth figure. | ||
Approximately 70.6% of revenues derive from automotive OEM supply chain customers, concentrating the business in a single end market where demand cycles, production schedules, and inventory decisions are largely beyond management's control. Bear case | If diversification proceeds, non-automotive revenue should grow to represent more than 35% of total revenue within 12 months. | →Stable |
| CounterAutomotive electrification is a multi-year shift that continues to increase semiconductor content per vehicle, which could sustain elevated demand even during a normal auto-cycle pause. | ||
The stock is currently trading above the analyst consensus price target, producing a negative reward-to-risk ratio; with no upside headroom remaining from the current price of $55, the geometric setup does not support new entry. Price targets | If analysts upgrade their targets, the consensus price target should rise above $61 — restoring more than 10% upside — before the entry setup becomes constructive. | →Stable |
| CounterHigh-growth semiconductor stocks frequently trade through consensus targets on momentum; a strong earnings print could prompt immediate analyst upgrades that close the gap between the stock and a higher target level. | ||
Short interest at 12% of float combined with implied volatility of 131% indicates significant institutional skepticism; these conditions create a risk of sharp, disorderly moves in either direction around any catalyst. Risk breakdown | If the bear thesis weakens, short interest should fall below 6% of float as shorts cover into improving fundamentals over the next 12 months. | →Stable |
| CounterElevated short interest can rapidly become a tailwind if earnings beat expectations, as forced covering accelerates price appreciation beyond what fundamentals alone would support. | ||
Revenue has expanded 26% year-over-year, and the company scores a near-perfect 9 out of 9 on the Piotroski financial health index, signaling broad-based balance-sheet strength across profitability, leverage, and operating efficiency dimensions.
→StableGrowth breakdown
- Expectation
- Revenue growth should remain above 15% year-over-year for two consecutive quarters, and the Piotroski score should stay at 8 or above over the next 12 months.
CounterGrowth is concentrated in automotive OEM supply chain customers, which represent 70.6% of revenues; any production slowdown or inventory correction within that customer base could rapidly compress the headline growth figure.
Approximately 70.6% of revenues derive from automotive OEM supply chain customers, concentrating the business in a single end market where demand cycles, production schedules, and inventory decisions are largely beyond management's control.
→StableBear case
- Expectation
- If diversification proceeds, non-automotive revenue should grow to represent more than 35% of total revenue within 12 months.
CounterAutomotive electrification is a multi-year shift that continues to increase semiconductor content per vehicle, which could sustain elevated demand even during a normal auto-cycle pause.
The stock is currently trading above the analyst consensus price target, producing a negative reward-to-risk ratio; with no upside headroom remaining from the current price of $55, the geometric setup does not support new entry.
→StablePrice targets
- Expectation
- If analysts upgrade their targets, the consensus price target should rise above $61 — restoring more than 10% upside — before the entry setup becomes constructive.
CounterHigh-growth semiconductor stocks frequently trade through consensus targets on momentum; a strong earnings print could prompt immediate analyst upgrades that close the gap between the stock and a higher target level.
Short interest at 12% of float combined with implied volatility of 131% indicates significant institutional skepticism; these conditions create a risk of sharp, disorderly moves in either direction around any catalyst.
→StableRisk breakdown
- Expectation
- If the bear thesis weakens, short interest should fall below 6% of float as shorts cover into improving fundamentals over the next 12 months.
CounterElevated short interest can rapidly become a tailwind if earnings beat expectations, as forced covering accelerates price appreciation beyond what fundamentals alone would support.
Per-dimension breakdown
Quality
4.7/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 0.0 |
| ROA | 1.1 |
| Gross margin | 5.3 |
| Op margin | 4.2 |
| Net margin | 0.0 |
| Current ratio | 9.5 |
| FCF quality | 6.0 |
| Moat | 5.8 |
| Piotroski F | 10.0 |
- ▸FCF-positive but moderate margins (FCF margin 17%, FCF yield 1.5%)
- ▸Strong Piotroski F-Score: 9/9
Growth
9.0/10data confidence 33%| Component | Sub-score |
|---|---|
| Rev growth | 9.0 |
- ▸Strong growth: 26% YoY
Momentum
5.1/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 10.0 |
| OBV | 1.0 |
| MA position | 9.0 |
| Volume | 0.0 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 4.0 |
| Analyst rating | 8.3 |
| Price target | 4.1 |
Insider
3.8/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 4.5 |
| insider conviction | 2.0 |
| holder change | 5.0 |
- ▸Modest insider selling — $3,419,563 (0.033% of mkt cap)
Peer rank
3.1/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.7 |
| quality rank | 2.0 |
| growth rank | 5.7 |
Technical
3.7/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.1 |
| support resistance | 1.2 |
| 52w position | 9.3 |
| gap | 3.0 |
- ▸Extreme gap up (5.4%) - may pull back
Risk (lower is worse)
3.7/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 4.0 |
| days to cover | 6.3 |
| volatility | 0.0 |
| put call | 4.3 |
| implied vol | 0.0 |
| max pain risk | 3.0 |
| beta | 3.4 |
| debt equity | 8.7 |
- ▸High IV: 87%
- ▸Above max pain $25
- ▸Concentration risks: 1 HIGH, 2 MED (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
6.6/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 5.0 |
| news activity | 8.0 |
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:5.1>=4.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:35d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-1.2=NEGATIVE
Warning (2)
- MOMENTUM:5.1<5.5 (soft — BUY_NOW allowed but watch)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-1.23
Upside
-18.4%
Downside
15.0%
Sizing output
AVOID
SetupBREAKOUT — Golden cross, above all MAs, RSI 57, MACD bullish
EdgeNO_EDGE — No clear edge identified
SuitabilityAGGRESSIVE — Beta 1.98>1.3
Investment implication
The F-path SELL output reflects an overall score of 5.1 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Growth at 9.0) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-1.2=NEGATIVE) reinforce the read. Current asymmetry R:R is -1.23 — supplementary context, not the trigger for this path.
The strongest dimensions are Growth at 9.0, Catalyst at 6.6, and Sentiment at 5.6; the weakest are Peer rank at 3.1, Risk (lower is worse) at 3.7, and Technical at 3.7. The V9 engine flagged 1 failed gate with 2 warnings, producing an asymmetric reward-to-risk of -1.23 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Revenue has expanded 26% year-over-year, and the company scores a near-perfect 9 out of 9 on the Piotroski financial health index, signaling broad-based balance-sheet strength across profitability, leverage, and operating efficiency dimensions.
Trip ifRevenue growth falls below 15% year-over-year for 2 consecutive quarters.
- P2The stock is currently trading above the analyst consensus price target, producing a negative reward-to-risk ratio; with no upside headroom remaining from the current price of $55, the geometric setup does not support new entry.
Trip ifAnalyst consensus price target rises above $61, restoring more than 10% upside from the current price.
- P3Approximately 70.6% of revenues derive from automotive OEM supply chain customers, concentrating the business in a single end market where demand cycles, production schedules, and inventory decisions are largely beyond management's control.
Trip ifNon-automotive revenue grows above 35% of total revenue for 2 consecutive quarters.
- P4Short interest at 12% of float combined with implied volatility of 131% indicates significant institutional skepticism; these conditions create a risk of sharp, disorderly moves in either direction around any catalyst.
Trip ifShort interest falls below 6% of float.