IPO Stock Of The Week and hot chip stock Allegro MicroSystems (ALGM) is testing a key support level after a 42% rally in just over two months. ALGM stock is one of the top IPO stocks to buy and watch and is on the IBD IPO Leaders stock screen.
XAllegro is a designer, developer and marketer of specialized integrated circuits used mostly in automobile and industrial markets. The devices also show up in a range of consumer and computer segments. These integrated circuits — or ICs — can precisely measure motion, speed, position and current in a wide variety of environments and applications.
Allegro's chips are used in automotive powertrains, braking and steering systems. It counts all major carmakers as customers, but no one buyer accounts for more than 10% of sales.
In fiscal 2022, 62% of Allegro sales came from magnetic sensor products while power chips comprised the other 38%. Its sensor chips enable customers to precisely measure motion, speed, position and electrical current. Also, its power chips enable high-temperature and high-voltage capable motor drivers and power management.
Allegro Earnings Jump
On Jan. 31, Allegro beat Wall Street's targets for its fiscal third quarter and guided higher for the current period, thanks in part to robust automobile chip sales. ALGM stock surged nearly 11% on the news.
The Manchester, N.H.-based company earned an adjusted 35 cents per share on sales of $248.8 million in the December-ended quarter. Analysts polled by FactSet had expected earnings of 32 cents per share on sales of $245.2 million. On a year-over-year basis, Allegro earnings jumped 84% while sales increased 33%.
ALGM stock boasts a perfect 99 IBD Composite Rating, making it a leading chip stock to watch. This ranking blends key fundamental and technical metrics to help investors easily find top stocks.
Chip Stock Tests Key Support Level
Chip stock leader Allegro is pulling back to its key 10-week moving average line, with sharp losses this week. A successful rebound from this level will place the chip stock in a new buy zone, its first buy point since a January breakout.
Back in January, Allegro broke out past a cup-with-handle's 34.24 buy point, rallying more than 20% in less than three weeks, according to IBD MarketSmith chart analysis. A powerful rally in such a short time triggered the 8-week hold rule. That cautionary period has now expired and shares continue to perform well.
Amid the stock's big gains, as evidenced by a strong relative strength line, Allegro is one of the top chip stocks to watch in today's market.
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the stock market.
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April 07, 2023 at 12:07AM
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Chip Stock Leader Allegro MicroSystems Tests Key Level After 42% Rally - Investor's Business Daily
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