Astera Labs is a buy, Roth says

Who will benefit from a more than favorable environment for AI infrastructure demand?

Roth MKM analyst Suji Desilva has one name in mind and that is Astera Labs (Astera Labs Stock Quote, Chart, News, Analysts, Financials NASDAQ:ALAB).

In a research update to clients December 2, Desilva maintained his “Buy” rating on ALAB, but raised his price target from $105.00 to $130.00.

The analyst explained the reasoning behind the move.

“We believe ALAB’s strong existing AI accelerator attach opportunity is magnified in a backdrop of accelerating AI infrastructure spending and diversifying AI infrastructure rack architectures in the marketplace,” he said. “We believe that ALAB’s newest product family Scorpio can show high incremental dollar content attach per AI accelerator for the company, on top of its strong Aries and Taurus content opportunities. We believe ALAB can gain opportunity as hyperscalers increasingly diversify their AI infrastructure architectures from incumbent AI accelerator GPU- based solutions today. We believe ALAB content opportunity continues to broaden and expand with each new GPU generation launch as well as with increasing hyperscaler adoption of alternate AI accelerator solutions.”

Desilva thinks the company will post EPS of $0.72 on revenue of $383.2-million in fiscal 2024. He expects those numbers will improve to EPS of $1.00 on a topline of $582.0-million in fiscal 2025.

“Our ALAB price target of $130 represents a CY25 EV/Sales of ~30x, a premium versus the overall technology peers CY25 average of ~10x reflecting the company’s early-stage growth opportunity,” the analyst added. “Impediments to achieving our valuation include exposure to an emerging quantum solutions market, technological challenges developing quantum computing systems, sustaining/growing customer application-driven recurring revenue and competitive pressure from emerging quantum computing solutions vendors.”