Diodes (Nasdaq: DIOD), the analog semiconductor supplier, has been initiated with a buy rating and $135 price target by Bank of America (BofA), which expects the company to grow earnings per share at a 58% annual rate from 2026 to 2028, well ahead of the 35% forecast for analog chip peers.
The target rests on 17 times 2028 pro forma earnings per share, which reflects normalized earnings.
Diodes makes small, high-volume analog and discrete chips used in power management, timing and connectivity in cars, servers and factories, and ships 45 billion units a year to 50,000 customers.
The forward price-to-earnings multiple has dropped from about 38 to below 17 in recent months, reflecting concern that growth and earnings are near a peak, which the bank disputes.
Diodes has outgrown its market in every upturn since 2001 and holds less than 2% of a $134 billion addressable market, relying on acquisitions and early design wins.
Auto should lead the next phase, with Diodes' content per vehicle rising 50% in two years to $239 and further growth potential from connectivity, driver assistance and electric vehicles.
AI data center sales, now 12% of the total, could triple by 2030 as the value of Diodes chips in each server rack increases.
Gross margins have lagged the revenue recovery by six quarters, and customer notice data points to margin-boosting activity in the second half of 2026 and 2027, implying upside to consensus gross margins.
Larger analog rivals that can bundle products, and subsidized Chinese suppliers at the low end, could squeeze Diodes, which sits in the middle of the analog value chain.
Its hybrid manufacturing model can limit its ability to capture demand in an upturn and leaves it exposed to cost increases, and its small scale is a risk.
Shares of Diodes rose over 6% to trade at $109.85 on Tuesday afternoon.
