Astera Labs (ALAB) Stock: Drops 10% Following Intel-Nvidia Partnership Announcement

TLDR

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Astera Labs (ALAB) dropped nearly 10% on Wednesday, marking its biggest decline since April, after Intel-Nvidia partnership concerns surfaced
The stock opened at $212 after closing at $230.11, with trading volume reaching 3.8 million shares
Morgan Stanley noted the Intel-Nvidia collaboration could impact Astera’s business, though specific risks weren’t detailed
Analyst opinions remain mixed, with Northland Securities downgrading to “market perform” while Citigroup raised its price target to $275
Despite the drop, ALAB remains up about 55% year-to-date and nearly 300% over the past twelve months

Astera Labs took a beating on Wednesday, with shares tumbling nearly 10% in what became the semiconductor company’s worst day since April. The stock opened at $212, down from Tuesday’s close of $230.11, before sliding further to $203.87 during trading.

The selloff put roughly $4 billion of market value at risk. Trading volume spiked to 3.8 million shares as investors rushed to reassess their positions.

The decline caps off several days of losses that began on September 19. That’s when Morgan Stanley analysts flagged concerns about a new partnership between Intel and Nvidia to co-develop PC and data center chips.

The investment bank suggested this collaboration could carry implications for Astera’s business model. However, Morgan Stanley didn’t spell out exactly what risks the company might face.

Analyst Views Remain Split

Wall Street analysts can’t seem to agree on Astera’s prospects. Northland Securities recently downgraded the stock from “outperform” to “market perform,” slapping a $120 price target on shares.

That’s a far cry from Citigroup’s bullish stance. The bank raised its price target from $160 to $275 while maintaining a “buy” rating on September 17.

Morgan Stanley also bumped up its target from $155 to $200 with an “overweight” rating. Susquehanna took a more cautious approach, lifting its target from $80 to $125 but keeping a “neutral” rating.

The consensus among 19 analysts gives Astera a “moderate buy” rating with an average price target of $152.94. That’s still well below current trading levels.

Insider Selling Raises Eyebrows

Company insiders have been active sellers recently. CEO Jitendra Mohan offloaded 152,517 shares in early August at an average price of $170.33.

The sale netted Mohan nearly $26 million and reduced his stake by about 25%. CFO Michael Truett Tate also cashed out, selling 100,000 shares for roughly $17.1 million.

Combined, insiders have sold over 1.5 million shares worth $239 million in the past three months. Insiders still own 12.5% of the company.

Strong Performance Despite Setback

Wednesday’s drop doesn’t erase Astera’s stellar run this year. The stock remains up about 55% year-to-date and has surged roughly 178% over the past six months.

Looking back twelve months, shares have climbed close to 300%. That performance has pushed Astera’s market cap to $34.95 billion.

The company trades at a steep 375 times earnings, reflecting high growth expectations. Its beta of 1.48 means the stock tends to move more dramatically than the broader market.

Recent earnings showed why investors got excited. Astera reported $0.44 per share in the second quarter, beating estimates by $0.11.

Revenue hit $191.93 million, up 149.5% from the same period last year. The company posted a healthy 16.54% net margin and 9.53% return on equity.

For the third quarter, Astera guided for earnings between $0.38 and $0.39 per share. Analysts expect full-year earnings of $0.34 per share.

The company’s 50-day moving average sits at $175.65, while the 200-day average is $112.14. Wednesday’s close puts the stock well above both technical levels.

Institutional investors own about 60.47% of Astera’s shares, with several funds recently adding to their positions during the second quarter.

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