Astera Labs is the IBD Stock of the Day for Wednesday. Shares of the AI chip connectivity firm are racing past their 21-day exponential moving average, as Astera stock looks to bounce back from a slump earlier this year.
On the stock market today, Astera stock rose 8.2% to close at 99.86. Shares could be seen as actionable as they move past its 21-day line.
The Santa Clara, Calif.-based Astera Labs makes connectivity chips and other solutions for cloud and artificial intelligence data centers. Optimism for AI stocks has rebounded in recent weeks as tariff fears fade. Chip stocks in particular are bouncing back. Nvidia climbed to a record high Wednesday and became the first company to reach a $4 billion market capitalization.
The eight-year-old Astera went public last March and posted a blistering rally in its first nine months of trade. Shares climbed more than 300% from a debut price of 36 to a high near 147 in January.
But Astera stock fell into a deep slump that began that same month. Shares fell along with other major chip stocks and AI players following the emergence of the DeepSeek large language models in late January. Concerns about tariffs also weighed on shares. Astera's Q4 and Q1 results failed to restart the rally, despite the company posting triple-digit growth for adjusted earnings and sales in both periods.
ALAB stock is down 26% year-to-date, but has gained momentum of late. Shares are ahead about 8% in July after trading flat in June and rallying 39% in May.
Astera Labs Q3 Earnings Preview
The next test for Astera stock comes early next month when it reports third quarter earnings. The company announced this week that it will publish its results on Aug. 5.
Analysts polled by FactSet are expected Astera Labs to post a 149% year-over-year increase in adjusted earnings, to 32 cents per share. Sales are seen rising 124% to $172.5 million.
For the full year, Astera Labs sales are projected to rise 78% to $702.3 million, according to FactSet, slowing from the 242% surge in revenue the company posted for 2024.
Out of 17 analysts following the stock, 16 have buy ratings, according to FactSet. One analyst maintains a neutral rating.
JPMorgan analyst Harlan Sur is among the bulls. He reiterated an overweight rank for Astera Labs in a late-May client note, with a price target of 100.
"Astera is the leader in high-speed connectivity for accelerated compute/AI servers and is leveraging its core expertise in high-speed connectivity and system-level understanding to move into other areas of the data center connectivity market like traditional networking and memory," Sur wrote. "The increasing compute workload complexity is driving performance bottlenecks across the data center, and the team has three strong products that should help unlock some of these constraints."
Astera Stock Technical Ratings
Meanwhile, recent ALAB stock consolidated in a flattish pattern, offering an entry at 101.82.
Within that consolidation, the stock is rebounding from several levels of support. First is support at its converged 50- and 200-day moving averages. A downtrend drawn using the highs of June 20 and June 26 would place an early entry around 94.
The rebound from the chart's 21-day exponential moving average, at just above 90, would also have made the stock actionable.
Astera Labs stock has a solid 90 IBD Composite Rating out of a best possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating.
Meanwhile, Astera Labs' relative strength line has rebounded to 92 out of 99, per MarketSurge. That's a big improvement from the score of 22 ALAB stock was showing three months ago.
Astera Labs stock has a 21-day average true range (ATR) of 6.33%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
