Leading AI Stock Clears Key Hurdle Ahead of Earnings: Time to Buy?

The artificial intelligence boom may be just getting started.Tech stocks have led the charge off the April lows as this bull market enters its next phase. Semiconductor stocks and related companies remain at the heart of the movement.Astera Labs has been a major beneficiary. The company designs and manufactures semiconductor-based connectivity solutions for cloud and AI infrastructure. Astera offers an intelligent connectivity platform and high-speed connectivity integrated circuits as well as modules, boards, and other related products used in data centers.Partnerships remain a key catalyst for Astera. The company is deepening its collaboration with chip leader Nvidia as it integrates NVLink Fusion into its connectivity platform, delivering low-latency, memory-coherent links for GPU clustering. These are essential for powering the next generation of large language models and agentic AI models.ALAB stock is displaying relative strength off the April lows and has been making a series of higher highs. The broader technology sector is providing a durable backing for this industry leader. Increasing volume has attracted investor attention as buying pressure accumulates in this top stock.The Zacks RundownAstera is part of the Zacks Internet – Software industry group, which currently ranks in the top 25% out of approximately 250 industries. Because this group is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months, just as it has over the past few months:Image Source: Zacks Investment ResearchTake note of the favorable characteristics for this group below. Stocks in this industry are projected to experience above-average earnings growth, which signifies a powerful tailwind that should lead to higher prices in the future.Image Source: Zacks Investment ResearchHistorical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top industries, we can dramatically improve our stock-picking success.Earnings Trends and Future Estimates Astera has exceeded the earnings mark in each quarter since last year’s IPO. Back in May, the AI infrastructure provider delivered first-quarter earnings of 33 cents per share, which marked a 17.9% beat relative to consensus estimates.The company has delivered a trailing four-quarter average earnings surprise of 28.4%. Consistently beating earnings estimates is a recipe for success.Analysts covering ALAB are mainly in agreement in terms of revisions and have been increasing their earnings estimates lately. We can see below that full-year earnings estimates have risen 0.75% over the past 60 days to $1.35 per share. This translates to bottom-line growth of over 60% relative to last year on 77% higher revenues.Image Source: Zacks Investment ResearchAs we near Q2 earnings results in early August, the stock appears to be gaining momentum. Analysts are expecting Astera to post a 154% year-over-year increase in adjusted earnings to 33 cents per share. Revenues are anticipated to climb 125% to nearly $173 million.ALAB Shares Go Full Steam Ahead of EarningsThis market leader has seen its stock advance nearly 90% off the April lows. Only stocks that are in extremely powerful uptrends are able to experience this type of outperformance. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.Astera ALAB stock appears to be breaking out of a powerful cup-with-handle pattern:Image Source: StockChartsNotice how shares have found support at both the 50-day (blue line) and 200-day (red line) moving averages, which are sloping up. The stock has been making a series of higher highs over the past few months. With both strong fundamental and technical indicators, ALAB stock is poised to continue its outperformance.Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Astera Labs has recently witnessed positive revisions. As long as this trend remains intact (and Astera continues to deliver earnings beats), the stock will likely continue its bullish run.Bottom LineBacked by a leading industry group and history of earnings beats, it’s not difficult to see why ALAB stock is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly justify taking a closer look.Recent positive earnings estimate revisions should also serve to create a ‘floor’ in terms of any sudden or unexpected downside moves. If you haven’t already done so, be sure to put ALAB on your watchlist.Disclosure: ALAB is a current holding in the Zacks Headline Trader portfolio.Higher. Faster. Sooner. Buy These Stocks NowA small number of stocks are primed for a breakout, and you have a chance to get in before they take off.At any given time, there are only 220 Zacks Rank #1 Strong Buys. On average, this list more than doubles the S&P 500. We’ve combed through the latest Strong Buys and selected 7 compelling companies likely to jump sooner and climb higher than any other stock you could buy this month.You'll learn everything you need to know about these exciting trades in our brand-new Special Report, 7 Best Stocks for the Next 30 Days.Download the report free now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Astera Labs, Inc. (ALAB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks