On Thursday, CLSA increased the price target on Advantest Corp (6857:JP) (OTC: ATEYY) to ¥10,300 from the previous ¥9,300, while continuing to recommend an Outperform rating on the stock. The adjustment follows Advantest's report of higher-than-anticipated profits for the second quarter, buoyed by robust sales of SoC testers, particularly to AI customers.
The company has also revised its operating profit guidance for the fiscal year ending March 2025 to ¥165 billion, a figure that surpasses the market consensus. This outlook remains based on conservative foreign exchange rate assumptions, which have not been altered. Additionally, Advantest has declared its intent to repurchase shares worth up to ¥50 billion.
In response to these developments, CLSA has updated its earnings projections for Advantest, mainly due to the strong performance in the computing and mobile SoC tester segments. Consequently, the firm has elevated its price-to-earnings based target from ¥9,300 to ¥10,300. The firm reaffirms its positive stance on the stock, citing the potential for Advantest to outperform its conservative guidance in the second half of the year, depending on the company's supply capabilities.
In other recent news, Advantest Corporation has reported a robust first quarter for the fiscal year 2024, with increased sales, operating income, and net income. Key drivers behind this performance include a surge in demand for System-on-Chip (SoC) testers, largely due to growing complexities in the semiconductor industry. As a result of these recent developments, the company has revised its full-year guidance for FY 2024 upward, projecting sales up to JPY600 billion.
Analysts at CLSA Securities have noted that SoC computing and communication now account for 80% of sales, primarily driven by high-end computing for AI accelerators. Despite the unpredictability of test times and device complexity, Advantest is confidently navigating these challenges. The company is also developing next-generation High Bandwidth (NASDAQ:BAND) Memory (HBM) test solutions, further evidencing their commitment to meeting the evolving demands of the semiconductor testing market.
While uncertainties remain regarding the recovery of demand for application processors, Advantest remains optimistic about its growth prospects and long-term goals. The company is focusing on improving profitability and expanding production capacity to meet the anticipated growth in the semiconductor tester market, which is expected to grow by approximately 15% in 2024.
InvestingPro Insights
Advantest Corp's recent performance and CLSA's optimistic outlook are further supported by real-time data from InvestingPro. The company's market capitalization stands at $44.09 billion, reflecting its significant presence in the Semiconductors & Semiconductor Equipment industry. Advantest's strong position is underscored by its impressive 1-year price total return of 156.09%, indicating substantial investor confidence.
InvestingPro Tips highlight that Advantest has maintained dividend payments for 33 consecutive years, demonstrating a commitment to shareholder returns. This aligns with the company's recent announcement of a share repurchase program worth up to ¥50 billion. Additionally, Advantest's liquid assets exceed short-term obligations, suggesting a solid financial foundation to support its growth initiatives.
However, investors should note that Advantest is trading at high valuation multiples, including a P/E ratio of 88.52. This premium valuation could be attributed to the company's strong market position and growth prospects in AI-related technologies, as mentioned in CLSA's report.
For readers interested in a more comprehensive analysis, InvestingPro offers 18 additional tips for Advantest Corp, providing a deeper understanding of the company's financial health and market position.
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