Allegro MicroSystems (ALGM) has caught investor attention after reporting third quarter net income of US$8.3 million, compared with a net loss a year earlier, along with higher sales and updated guidance for future earnings.

The earnings rebound and fresh guidance have arrived alongside a sharp shift in sentiment, with a 34.2% 1 month share price return and a 71.46% 1 year total shareholder return. However, the 3 year total shareholder return of a 5.92% decline suggests longer term momentum has been weaker.

If Allegro’s recent move has you rethinking the semiconductor and AI hardware space, it could be worth checking our screener of 33 AI infrastructure stocks as a starting list of related opportunities.

With Allegro MicroSystems now back to profitability, a sharp share price move, and the stock trading only slightly below the average analyst price target, the key question is whether there is still a buying opportunity or if the market is already pricing in future growth.

Most Popular Narrative: 9.3% Overvalued

With Allegro MicroSystems closing at $41.99 against a narrative fair value of $38.42, the current price sits ahead of what this widely followed framework suggests, putting extra focus on the growth story behind that valuation.

Industrial automation and data center markets are rebounding, with design wins and expanding content in high-growth sectors (data center cooling, robotics, automation), indicating increasing demand for Allegro's advanced sensors and power ICs. This is expected to support higher revenues and incremental margin improvements as secular demand trends strengthen.

Curious how that fair value is built? The narrative leans on faster revenue expansion, a sharp earnings swing into profit, and a richer future multiple. Want the exact assumptions behind those moves?

Result: Fair Value of $38.42 (OVERVALUED)

However, this story can change quickly if auto demand softens or Chinese competitors force tougher pricing, which could pressure both Allegro’s growth expectations and margins.

Build Your Own Allegro MicroSystems Narrative

If this version of the story does not quite fit your view, or you would rather test the numbers yourself, you can build a custom thesis in minutes by starting with Do it your way.

A good starting point is our analysis highlighting 1 key reward investors are optimistic about regarding Allegro MicroSystems.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.