Here’s why Astera Labs stock may jump by 40% and hit an all-time high

Astera Labs stock has held steady in the past few days, moving from a low of $251.97 on September 15 to the current $358. This price action has coincided with that of other companies in the artificial intelligence (AI) industry, like Corning, Lumentum, and Coherent. So, will the stock continue rising in the near term?

Astera Labs stock has bullish technicals

Technicals suggest that the ALAB stock will rebound in the coming weeks or months. It formed a double-bottom pattern at $251.97, its lowest level in July and September this year. It is now trading at the neckline at $358, its highest level on August 4 this year.

The stock is now trading slightly above the 38.2% Fibonacci Retracement level. It is also forming a bullish pennant pattern, which often leads to a continuation. It has also jumped above the Supertrend indicator. 

Therefore, the stock will likely have a strong bullish breakout, with the next target the psychological level of $501, its highest level in June this year, and 40% above its current level. This target is in line with what analysts at RBC expect. 

ALAB stock chart | Source: TradingView

Astera Labs business has some notable catalysts

Astera Labs is a top company in the artificial intelligence industry, where it creates connectivity solutions that link GPUs, CPUs, memory, storage, and networking equipment inside AI servers and racks. 

The company’s business is doing well, helped by the ongoing data center buildup in the United States and other countries. Gartner estimates that AI infrastructure spending will be between $2.59 trillion and $2.67 trillion this year, up by 49% from a year earlier. 

This growth is expected to jump in the coming years. Jamie Dimon, the CEO of JPMorgan, predicts that AI spending will hit $1 trillion next year. Other analysts from companies like PwC and Deloitte have all boosted their outlook for AI spending. 

If this view is correct, it means that the company stands to benefit because of its role in the AI industry. This is especially important for Astera Labs as it prepares to launch and commercialize Leo, which creates a dedicated, fabric-attached memory tier connected more directly to GPUs through its Scorpio switches. 

The last results showed that Astera Labs’ revenue jumped by 104% YoY in the second quarter to $392 million. Its gross margin rose to 73.3%, while its operating profit margin rose to 22.7%. 

Analysts expect the growth to continue, with revenue expected to jump by 138% to $550 million. Its earnings per share are expected to jump from 50 cents last year to $1.19 in this quarter. 

Astera Labs’s annual revenue is expected to jump to $1.91 billion this year from $852 million last year. It will then jump to over $2.97 billion next year. 

This revenue growth may help to justify its valuation, which has become highly elevated in the past few months. The company has a forward price-to-earnings ratio of 87, higher than the sector median of 23. Its forward PEG ratio of 1.66 is also higher than the sector median of 1.25. 

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