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Allegro MicroSystems shares climbed in morning trading on Friday, October 2, after RBC Capital Markets began coverage of the semiconductor maker with an Outperform rating and a $50 price target. Investing.com reported the stock was up 6.5% at $38.76 during the morning session, following a prior close of $36.38. The move came as RBC’s initiation offered investors a fresh bullish view after a steep retreat from the stock’s recent high.
The analyst firm’s case rests on expected growth in Allegro’s automotive and data-center businesses, alongside potential improvement in gross margin. Those are RBC forecasts, not company guidance: the company’s next scheduled earnings report is October 29, when investors will get a new opportunity to assess results and outlook.
RBC’s rating and price target
RBC initiated coverage with an Outperform rating and a $50 target, according to same-day Investing.com reporting. The target is above the $38.76 price cited during Friday morning trading, but it represents the analyst’s assessment rather than a guaranteed future price. RBC analyst Srini Pajjuri led the coverage initiation, according to the report.
RBC characterized Allegro as a leader in magnetic position and current-sensing integrated circuits, with a growing presence in power-management chips. The firm argued that investor expectations—particularly around the company’s expanding data-center business—had risen, contributing to a pullback in the shares, while it viewed the business fundamentals as intact.
Growth expectations center on autos and data centers
RBC projected about 20% revenue growth and roughly 200 basis points of gross-margin expansion over the next two years. It tied that outlook to increasing semiconductor content in automotive applications, including advanced driver-assistance systems and electric vehicles, as well as continued data-center demand. These projections belong to RBC and should not be confused with Allegro’s own forecast.
The company’s latest reported results provide context for the analyst’s focus. Allegro said fiscal first-quarter 2027 sales, for the quarter ended June 26, 2026, reached $259 million, up 27% from a year earlier. In its July 30 results announcement, the company said this was its sixth consecutive quarter of sequential sales growth; it also reported that data centers accounted for a record 17% of sales, with continued strength in electric-vehicle and driver-assistance applications.
Those results show recent growth in the markets RBC highlighted, but one quarter does not establish that the analyst’s two-year projections will be achieved. The company’s reported sales and RBC’s forward estimates are distinct measures, and future demand, margins and customer spending remain uncertain.
Shares had fallen sharply from their peak
Investing.com reported that Allegro shares had retreated about 38% from a recent high of $71.77 before Friday’s rise. The same-day coverage report described the decline as a result of elevated expectations, especially for data-center growth, rather than deterioration in underlying fundamentals. That explanation reflects RBC’s interpretation, not a confirmed company finding about the causes of the share-price decline.
Friday’s broader market also advanced, with the Nasdaq up about 1.1% and the S&P 500 gaining roughly 0.6% at the time cited by Investing.com. The gains supplied a favorable backdrop for technology shares, though the analyst initiation was the specific Allegro-related catalyst identified in the reports.
What investors will watch next
Allegro’s next earnings report is expected on October 29, according to the market report. Until then, the questions raised by RBC’s thesis include whether data-center sales continue to expand, automotive demand sustains its contribution, and margins improve as projected. The company has not confirmed RBC’s two-year growth and margin estimates as its own targets.
For now, the day’s advance reflects a new analyst endorsement and a constructive market session. RBC’s target and forecasts provide one view of Allegro’s prospects; the scheduled earnings update will offer the next company-reported evidence on sales trends and profitability.
