Morgan Stanley upgraded Allegro MicroSystems (ALGM) from Equalweight to Overweight and set a $51.00 price target, signaling an implied upside of approximately 21.9% from a prevailing share price of $41.83.
The research note frames Allegro as positioned where a cyclical recovery intersects with ongoing secular growth trends, particularly in automotive end markets. Morgan Stanley emphasized the company's powertrain-agnostic portfolio as a structural advantage that could support sustained revenue growth relative to both global light vehicle production and automotive semiconductor peers in 2026 and 2027.
Performance data cited alongside the upgrade show strong recent price appreciation for the stock - a roughly 70.25% gain over the past year and a 58.57% increase year-to-date - underscoring investor interest as the company navigates the recovery.
Beyond automotive, Morgan Stanley highlighted the industrial segment as a meaningful driver of future expansion. Within that segment, the firm pointed to nascent opportunities in data center applications tied to thermal management and power. Those data-center related sales represented about 10% of revenue in the December quarter and are estimated to account for about 8% of calendar year 2025 revenue.
Analyst estimates incorporated in the outlook show an expectation for revenue growth of 22% in fiscal 2026, and the note referenced five analyst upward revisions to upcoming earnings estimates. Morgan Stanley sees room for gross margin and operating margin expansion as volumes recover and the company’s product mix shifts toward higher-value technologies such as tunnel magnetoresistance (TMR) sensors and gate drivers.
Margin support is also expected to come from supply-chain diversification and disciplined control of operating expenses. The company’s liquidity position was highlighted as strong, with a current ratio of 3.65 indicating that liquid assets comfortably exceed short-term liabilities.
The firm acknowledged that Allegro had set a prior long-term model just before a 2023 peak and the subsequent inventory-driven downturn in 2024, but noted execution has remained steady through that cycle. Morgan Stanley suggested refreshed targets are likely to reflect a more stable economic backdrop.
Although Allegro has not been profitable over the last twelve months, consensus forecasts point to a return to profitability this year, with an expected EPS of $0.53.
Recent company announcements and results provide additional context to the upgrade. In Q3 2026 Allegro reported adjusted earnings per share of $0.15, versus a consensus expectation of $0.14, and generated $229.2 million in revenue compared with an anticipated $220.79 million. These results demonstrate a modest beat on both the top and bottom lines for the quarter.
On the product front, Allegro introduced the ACS37017 Hall-effect current sensor. The device is factory-calibrated and is specified to deliver a typical sensitivity error of 0.55% over its lifetime, targeting high-voltage power conversion system applications.
Leadership moves announced by the company include the promotion of Ian Kent to Senior Vice President, Operations and Jamie Haas to Vice President, Chief Technology Officer. Kent, who joined Allegro in 2023, has been tasked with overseeing worldwide manufacturing and supply chain operations.
Taken together, the upgrade, recent financial beats, new product introductions and leadership changes form the basis of Morgan Stanley’s more bullish stance, as the firm anticipates revenue recovery, improving margins and continued secular support from automotive and industrial end markets.