Citi updated its stance on Teradyne (NASDAQ: NASDAQ:TER), a leading provider of automated test equipment, by reducing the stock's price target to $162 from the previous $185 while still affirming a Buy rating on the shares.
The firm has revised its EPS estimates downward for the calendar years 2024, 2025, and 2026 by 1%, 3%, and 3% respectively, due to updated system-on-chip (SoC) total addressable market (TAM) assumptions.
Despite this, a Citi analyst suggests that Teradyne has mitigated potential revenue impacts from weaknesses in the smartphone and auto/industrial sectors within its low single-digit year-over-year growth forecast.
The Citi note published on Friday anticipates a significant recovery in semiconductor test sales for Teradyne, projecting a robust 24% year-over-year increase next year. The optimistic outlook is largely attributed to an improving end-market mix, especially with opportunities in mobility and server compute segments at a major client, Apple (NASDAQ:AAPL).
Citi's revised price target of $162 is based on a sum-of-the-parts (SOTP) valuation approach, applied consistently to the updated calendar year 2025 estimates.
Recently, Cantor Fitzgerald also adjusted its price target from $180 to $160, while maintaining a Neutral rating. The revision follows Teradyne's recent financial performance, which included a solid earnings beat but a slight revenue miss, with combined second and third-quarter revenues and earnings per share (EPS) expected to be $1.44 billion and $1.62 respectively.
Northland also adjusted its price target for Teradyne to $126.00, a decrease from the previous target of $136.00, maintaining its Market Perform rating. The adjustment was based on a mixed performance across Teradyne's business segments.
Also, Goldman Sachs, despite reducing its price target to $151 from $161, reaffirmed its Conviction Buy rating on the stock, citing the company's strengthening position in Compute and High Bandwidth (NASDAQ:BAND) Memory (HBM) Test.
InvestingPro Insights
In light of the recent analysis by Citi on Teradyne, it's valuable to consider additional insights from InvestingPro. Teradyne's stock has experienced notable volatility, with a significant hit over the last week and month, as indicated by a one-week price total return of -15.08% and a one-month price total return of -15.34%. Despite this, the company has maintained dividend payments for 11 consecutive years, with a dividend growth in the last twelve months of 9.09%, showcasing a commitment to shareholder returns.
From a valuation standpoint, Teradyne is trading at a high earnings multiple, with a current P/E ratio of 38.88 and an even higher forward P/E ratio for the next twelve months at 43.16. This suggests that the market has high expectations for the company's future earnings growth. Additionally, the company's liquid assets surpass its short-term obligations, providing financial stability and the ability to cover interest payments, as reflected in the company's gross profit margin of 57.06%.
For those interested in a deeper dive into Teradyne's financial health and market position, InvestingPro offers a range of additional tips. To explore these insights and make informed investment decisions, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. With this code, investors can access comprehensive analysis and metrics that could further inform their perspective on Teradyne's future performance.
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