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Stock Strategist

Linear's High-End Focus Results in Peer-Beating Returns

The demand picture isn't as gloomy as feared for this wide-moat chipmaker.

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 Linear Technology (LLTC) reported solid fiscal second-quarter results and gave investors a relatively bright third-quarter outlook that in our view helped calm fears of a macroeconomic collapse, as the firm believes that the worst of a recent inventory correction is probably, but not definitely, behind it. Our long-term thesis for the wide-moat firm remains intact, and we would consider any pullback in the share price as a potential buying opportunity.

Linear's revenue in the December quarter was $347 million, down 1.5% year over year but up 1.5% sequentially and at the midpoint of the firm's forecast range of 0%-3% sequential growth discussed in October. Revenue from the transportation sector was the bright spot, up about 6% sequentially with good growth in China. We continue to view the secular rise in electronics content per car as the single-best growth driver for Linear and its peer group, and management also sounded confident in future tailwinds from autos.

Brian Colello does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.