On Thursday, TD Cowen adjusted its outlook on shares of FormFactor (NASDAQ:FORM), a semiconductor testing equipment provider, by reducing the stock's price target. The firm revised the target to $44 from the previous $60 while retaining a Hold rating on the shares. The decision reflects concerns over a deceleration in demand for smartphones and PCs, which is expected to impact FormFactor's December quarter performance.
The semiconductor industry has been facing a challenging environment, and FormFactor's recent outlook adjustment by TD Cowen is a response to these market conditions. The analyst from TD Cowen pointed out that, despite the current demand issues, FormFactor's fundamentals remain robust.
The company is anticipated to see growth in its High Bandwidth (NASDAQ:BAND) Memory (HBM) revenues, which are projected to increase from approximately $130 million in calendar year 2024 to $155 million in calendar year 2025. This growth would represent about 20% of the company's total revenues.
The analyst's forecast for FormFactor suggests a positive trajectory for the company's HBM revenues, which could see further upside if the current probe card intensity in HBM remains stable at 0.9%. The stability of this metric is crucial as it indicates the level of product utilization and demand within the industry.
It is important for investors to note that the revised price target and the maintained Hold rating suggest a cautious outlook for FormFactor's stock. As the company navigates the current market dynamics, TD Cowen's analysis will be one of the many factors investors consider when evaluating FormFactor's future prospects.
InvestingPro Insights
FormFactor's financial health and market position offer a nuanced perspective to complement TD Cowen's analysis. According to InvestingPro data, the company boasts a market capitalization of $3.11 billion and has demonstrated strong revenue growth, with a 26.65% increase in quarterly revenue as of Q2 2024. This growth aligns with the analyst's positive outlook on FormFactor's High Bandwidth Memory revenues.
InvestingPro Tips highlight FormFactor's solid financial footing, noting that the company "holds more cash than debt on its balance sheet" and "liquid assets exceed short-term obligations." These factors suggest financial stability, which could be crucial as the company navigates the challenging semiconductor market environment described in the article.
The company's profitability is also noteworthy, with an InvestingPro Tip indicating that FormFactor has been "profitable over the last twelve months." This is reflected in the company's EBITDA of $65.26 million for the last twelve months as of Q2 2024, with an impressive EBITDA growth of 59.34% over the same period.
While TD Cowen has adjusted its price target, it is worth noting that the InvestingPro Fair Value for FormFactor stands at $40.3, providing an additional reference point for investors considering the stock's valuation.
For readers interested in a more comprehensive analysis, InvestingPro offers 10 additional tips for FormFactor, which could provide further insights into the company's financial health and market position.
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