Northland analysts downgraded Astera Labs (NASDAQ:ALAB) from Outperform to Market Perform, setting a price target of $120, citing concerns over valuation and the likelihood of profit-taking by investors as the New Year begins.
Astera Labs is currently trading at 44 times the consensus non-GAAP earnings per share (EPS) estimate for 2028, which stands at $2.99. While the dynamic growth of the AI market and increased spending on connectivity may drive these estimates higher, sustaining such growth levels in the long term could be challenging. Consensus projections already anticipate a compound annual growth rate (CAGR) of 39% for revenue and 42% for non-GAAP EPS over the next four years.
Assuming more optimistic growth scenarios—with revenue growth at 51% and EPS growth at 53%—the 2028 non-GAAP EPS could reach $4.00 on $1.98 billion in revenue. However, maintaining revenue growth above 50% over an extended period, even in the booming AI semiconductor space, is historically rare. By comparison, NVIDIA’s growth from 2020 to 2024—a period spanning the pandemic and the early AI surge—achieved a CAGR of 67%. Such explosive growth is unlikely to continue for Astera Labs as cloud service providers moderate their AI-related spending by 2028.
Astera Labs had a strong 2024, and its IPO in May at $36 per share has since seen shares climb to $133.45 by the end of the year. Given the significant run-up, the analysts expect many investors to lock in gains, further supporting the downgrade.