What Happened?

Shares of chip designer Allegro MicroSystems (NASDAQ:ALGM) jumped 22.3% in the morning session after Bloomberg reported the company is fielding takeover interests from peer, ON Semiconductor. The sources added that there could be other bidders in the mix too. Most acquisitions close at a premium, raising the possibility that existing investors could exit their positions at a higher price if Allegro strikes a deal with a buyer.

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What The Market Is Telling Us

Allegro MicroSystems’s shares are very volatile and have had 27 moves greater than 5% over the last year. But moves this big are rare even for Allegro MicroSystems and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 10 months ago when the stock dropped 18.4% on the news that the company reported weak first quarter results. Its revenue guidance for next quarter missed analysts' expectations and its operating margin shrunk. Gross margin also declined significantly, while inventory levels ticked up slightly. On the other hand, Allegro MicroSystems blew past analysts' EPS expectations this quarter. Its revenue also outperformed Wall Street's estimates. Still, the results could have been better.

Allegro MicroSystems is up 18.6% since the beginning of the year, but at $27.06 per share, it is still trading 18.4% below its 52-week high of $33.15 from July 2024. Investors who bought $1,000 worth of Allegro MicroSystems’s shares at the IPO in October 2020 would now be looking at an investment worth $1,529.

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