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Allegro MicroSystems (ALGM) Stock Trades Down, Here Is Why

ⓘ This article is third-party content and does not represent the views of this site. We make no guarantees regarding its accuracy or completeness.

ALGM Cover Image

What Happened?

Shares of chip designer Allegro MicroSystems (NASDAQ: ALGM) fell 13.4% in the pre-market session after ON Semiconductor withdrew its proposal to acquire the company. ON Semiconductor added that there was "no actionable path forward." 

The stock likely fell as the market reassessed the potential for the company to be taken private, with the prospect for shareholders to exit their current positions at a premium in the event of a buyout appearing more unlikely.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Allegro MicroSystems? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Allegro MicroSystems’s shares are extremely volatile and have had 36 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 about 1 month ago when the stock gained 22.3% on the news that 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 sealed a deal with a buyer.

Allegro MicroSystems is down 15.9% since the beginning of the year, and at $19.18 per share, it is trading 42.1% 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 $1,084.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.

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