Friday, Benchmark raised the price target for Onto Innovation Inc. (NYSE: NYSE:ONTO) shares to $230 from $180, while maintaining a Buy rating on the stock. The firm's analyst cited Onto's reported results for the June quarter, which exceeded expectations, and the company's guidance indicating higher sales for the second half of 2024.
Onto Innovation's recent financial performance has been bolstered by a surge in Power sales and an increase in Advanced Node sales. The analyst anticipates that these trends will contribute to a robust financial outlook for the company in 2025.
Key growth drivers identified include the expansion of Advanced Node and Power Semiconductor sales through artificial intelligence and high-bandwidth memory (HBM) opportunities, as well as high stack devices propelling Atlas (NYSE:ATCO) sales.
Additionally, the company is expected to benefit from advancements in logic packaging and the adoption of gate-all-around chips. The construction of new fabrication facilities, supported by investments from the United States, Europe, and Japan to bolster domestic chip production, is also projected to enhance Onto Innovation's prospects.
The analyst also forecasts a recovery in capital expenditures for NAND memory in 2025. This anticipated rebound, along with the aforementioned growth drivers, is expected to lead to a significant increase in Onto Innovation's non-GAAP earnings. The firm estimates a 23% year-over-year growth in earnings to $5.98 per diluted share for 2025.
In light of these positive indicators, Benchmark maintains its Buy rating for Onto Innovation Inc. The new price target of $230 reflects the firm's confidence in the company's growth trajectory and favorable market conditions anticipated for the upcoming year.
InvestingPro Insights
Onto Innovation Inc. (NYSE: ONTO) shows a compelling financial position with a market capitalization of $10.25 billion, reflecting investor confidence. The company's robust cash position, as indicated by InvestingPro Tips, suggests financial flexibility, with cash reserves surpassing debt levels. This is a positive sign for investors looking for companies with a strong balance sheet. Additionally, Onto's liquid assets exceed its short-term obligations, providing further evidence of the company's financial health.
Despite the positive outlook, analysts have tempered expectations, with three analysts revising their earnings downwards for the upcoming period. This could suggest that while the company's current performance is strong, there may be challenges ahead that could affect profitability. Furthermore, Onto is trading at a high earnings multiple with a P/E ratio of 85.07, which may indicate the stock is priced optimistically relative to earnings.
The company's performance over the last year has been notable, with a one-year price total return of 135.77%. This impressive return reflects strong investor sentiment and market performance. Onto's share price is also trading near its 52-week high, at 97.63% of the peak, which could indicate both momentum and a potential cautionary signal for investors wary of buying at the top.
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