Weakness Behind Allegro MicroSystems’ (ALGM) 4Q24 Numbers

The numbers indicate growth may remain stunted

Allegro Microsystems (ALGM) beat EPS forecasts for its fiscal 4Q24 (ending March 29) by 4 cents and revenue targets by $5.6 million. Guidance was poor. After posting 11% negative y/y sales growth for 4Q and down 6% sequentially – ALGM guided to 1Q25 revenue of $160-$170 million vs. 4Q’s $240 million.

Management blamed the weak guidance on customers rebalancing their inventory levels and working down inventory in the channel. (The largest industry ALGM serves is automotive.) The company is expecting gross margin to decline as it deals with lower production rates amid the inventory problems. Despite the weak guidance, the stock is up about 5% since the announcement. However, our review of the quarter’s numbers turned up several one-time benefits that more than explain away the earnings beat and may indicate that growth will be stunted over the next couple of quarters.

Let’s get behind the numbers…