On Friday, Evercore ISI updated its outlook on Teradyne (NASDAQ:TER), reducing the price target to $135 from the previous $145, while still maintaining an Outperform rating on the stock. The adjustment follows Teradyne's reported earnings for the September quarter, which surpassed expectations due to higher revenues and improved margins.
This success was attributed to robust performance in High Bandwidth (NASDAQ:BAND) Memory (HBM) and Compute segments, which include custom silicon and networking revenues.
The company's revenue forecast for the December quarter is on track, with earnings per share (EPS) anticipated to be higher owing to better-than-expected margins. Evercore ISI has subsequently raised its 2024 revenue growth outlook for Teradyne to 5% year-over-year, a revision from the earlier projection of low-single-digit growth. This upgrade is largely driven by the strength of AI-driven HBM and networking testers.
In addition to the revenue growth forecast, Evercore ISI has increased its 2024 System-on-Chip (SOC) Total Addressable Market (TAM) estimate for Teradyne to $4.2 billion, up from the prior estimate of $3.9 billion.
This adjustment reflects an anticipated rise in the Compute segment's TAM by $200 million to $1.8 billion, an increase in the Industrial segment's TAM by $100 million to $400 million, and a growth in the Memory segment's TAM by $150 million to $1.4 billion.
The revised price target and the maintained Outperform rating suggest that Evercore ISI continues to view Teradyne positively, despite the adjustment in the price target. Teradyne's strong performance in key technology areas seems to be driving the company's growth prospects and market potential as reflected in the updated financial metrics and market size estimates.
In other recent news, Teradyne Incorporated reported robust third-quarter results, with sales surpassing guidance at $737 million and non-GAAP earnings per share at $0.90. The company's Semi-Test segment showed strength, particularly in the Memory Test business, and the 2024 Total Addressable Market projections for the SoC segment have been increased to $1.8 billion, with Memory at $1.4 billion.
Despite a decline in wireless testing revenues and a weak overall memory market, the company expects the Robotics business to grow 50% sequentially in Q4 2024.
CEO Greg Smith and CFO Sanjay Mehta led the earnings call, providing insights into Teradyne's financial performance and market outlook. They highlighted stable robotics revenue and an upward revision of the semiconductor Automated Test Equipment Total Addressable Market for 2024. Q4 sales are projected between $710 million and $760 million, with non-GAAP earnings per share between $0.80 and $0.97.
These are recent developments for Teradyne, which has seen record revenue in the Memory Test business due to high demand for HBM DRAM. The company's equity investment in Technoprobe also contributed to the financial results. Looking ahead, Smith addressed the projected sales growth of 20% to 25% for 2025, citing expanding demand in AI Compute and the Chinese market.
InvestingPro Insights
Teradyne's recent performance and Evercore ISI's updated outlook are further supported by real-time data from InvestingPro. The company's market capitalization stands at $18.07 billion, reflecting its significant presence in the semiconductor testing industry. Teradyne's P/E ratio of 39.61 indicates that investors are willing to pay a premium for the company's earnings, likely due to its strong position in growth areas like AI-driven HBM and networking testers.
InvestingPro Tips highlight that Teradyne has maintained dividend payments for 11 consecutive years, demonstrating financial stability. This is particularly noteworthy given the company's involvement in the rapidly evolving tech sector. Additionally, Teradyne's liquid assets exceed short-term obligations, suggesting a strong financial position that aligns with Evercore ISI's positive outlook.
It's worth noting that while the stock has taken a hit over the last week, with a 1-week price total return of -12.15%, Teradyne still boasts a 26.47% return over the past year. This volatility may present an opportunity for investors, as one InvestingPro Tip suggests the stock could be in oversold territory based on its RSI.
For readers interested in a deeper analysis, InvestingPro offers 15 additional tips for Teradyne, providing a comprehensive view of the company's financial health and market position.
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