Hot on the heels of its recent initial public offering (IPO), Astera Labs (NASDAQ:ALAB) stock continued to gain ground in this week's trading. The Israel-based data-center tech company's share price ended this week's trading up 6% from last Friday's market close, according to data from S&P Global Market Intelligence. Meanwhile, the S&P 500 index climbed 0.4%.
Astera started the week's trading with strong bullish momentum thanks to positive coverage from an analyst. Northland's Gus Richard published a note on the stock on Monday, assigning it an outperform rating and a price target of $85 per share.
Northland goes bullish on Astera Labs stock
In his note on Astera, Northland's Gus Richard said he sees the company effectively addressing the limitations of connectivity solutions that limit processing capabilities. In addition to data-center connectivity chips, the company also sells related software to data-center hyperscalers.
The hardware-software combination gives Astera an ecosystem that Richard believes makes the company's product ecosystem sticky once customers have come on board. The stock rocketed higher following Northland's coverage on Monday and actually closed at exactly the $85 per share price point that Richard had predicted. Even though the stock closed lower in each subsequent day of trading, it's still up roughly 106% from its IPO listing price of $36 per share.
What comes next for Astera Labs?
Spurred by demand connected to artificial intelligence (AI), Astera's revenue climbed 45% annually to reach $115.8 million last year. With the company valued at roughly $11.3 billion, that means the company is valued at roughly 98 times last year's expected sales. That's an astronomical valuation multiple, but it looks like the company's sales growth could be poised to accelerate substantially.
Notably, the company's revenue increased from roughly $36.9 million in Q3 to $50.5 million in Q4 -- good for sequential quarterly growth of approximately 37%. Based on recent signs that demand and deployment are ramping, there's a good chance that this year's sales growth will actually come in far above of last year's level. With the company shifting into profitability and reporting net income of roughly $14.3 million in last year's fourth quarter, this year's bottom line could be much better as well.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
