Last Update08 Oct 25Fair value Increased 3.69%
Teradyne's analyst price target has been raised from $120.25 to $124.69. Analysts point to stronger test demand from AI accelerators and memory, along with increasing optimism for gains at major supply chain partners.
Analyst Commentary
Recent Street research on Teradyne reflects a broadly positive outlook, with several analysts raising their price targets and highlighting strong underlying business momentum. The commentary centers on the company’s strengthening position in critical areas of semiconductor testing. At the same time, some continued caution is noted as estimates and expectations are re-evaluated.
Bullish Takeaways- Bullish analysts are raising price targets significantly, reflecting strong conviction in Teradyne’s growth trajectory and market opportunity.
- Demand for test capacity related to AI accelerators, HBM, and mobile memory is expected to drive upward revisions in consensus earnings estimates for future years.
- Key wins and growing adoption at major industry players, particularly in AI compute supply chains, are leading to greater traction for Teradyne's advanced tester solutions.
- Recent company results have surpassed muted investor expectations. Momentum in new product areas like HBM4 and potential expansion in GPU testing further support the stock’s upward re-rating.
- Some analysts are expanding valuation multiples now without yet raising their earnings estimates. This underscores uncertainty about the timing and magnitude of the expected demand surge.
- Despite improved outlooks, at least one major firm maintains a conservative stance and highlights the need for continued execution as Teradyne seeks to penetrate new customer segments such as Nvidia.
- The stock’s near-term support is viewed as reliant on optionality rather than fully realized growth. This suggests execution risk remains as a consideration.
What's in the News
- Teradyne launched the ETS-800 D20, a high-performance test system for power semiconductors designed to serve both high-volume and high-mix/low-volume device testing needs. (Product-Related Announcement)
- The company introduced the Titan HP system level test platform, tailored for AI and cloud infrastructure markets and capable of supporting power demands up to four kilowatts in the future. (Product-Related Announcement)
- Teradyne released UltraPHY 224G for UltraFLEXplus, delivering next-generation high-speed PHY performance testing for data center and silicon photonics markets. (Product-Related Announcement)
- With the new Magnum 7H memory tester, Teradyne enables advanced testing for high bandwidth memory (HBM) used in AI servers and GPUs. This system achieves high parallelism and throughput. (Product-Related Announcement)
- Teradyne completed a share repurchase tranche and bought back 1,480,000 shares for $118.58 million as part of its ongoing buyback program. (Buyback Tranche Update)
Valuation Changes
- Consensus Analyst Price Target has risen modestly, increasing from $120.25 to $124.69 per share.
- Discount Rate has edged higher, moving from 9.97% to 10.08%.
- Revenue Growth projection remains virtually unchanged at approximately 13.22%.
- Net Profit Margin has improved slightly, up from 23.19% to 23.20%.
- Future P/E ratio has increased from 24.87x to 25.86x, reflecting higher valuation expectations.
Key Takeaways
- Strategic focus on AI, robotics, and semiconductor automation aims to drive significant future revenue and net margin improvement.
- Quantifi Photonics acquisition and share buyback plan reflect confidence in earnings growth and market position strengthening.
- Geopolitical and economic factors including tariffs are causing uncertainty, potentially impacting Teradyne's revenue, margins, and financial performance across multiple segments.
Catalysts
About Teradyne- Designs, develops, manufactures, and sells automated test systems and robotics products in the United States, Asia Pacific, Europe, the Middle East, and Africa.
- Teradyne expects significant future growth potential from AI accelerators, robotics, and semiconductor automation, which are being driven by long-term industry themes such as AI, verticalization, and electrification. These areas are likely to boost future revenue.
- The acquisition of Quantifi Photonics is anticipated to strengthen Teradyne’s position in silicon photonics testing, potentially enhancing revenue growth in semiconductor testing markets.
- Teradyne’s strategic initiatives in robotics and its recent structural reorganization aim to lower the operating breakeven, thus potentially improving net margins in the future as market conditions improve.
- The significant share buyback plan, up to $1 billion through the end of 2026, indicates confidence in future earnings and free cash flow generation, which could drive EPS growth.
- New opportunities in production board test for AI compute and new mobile testing enhancements demonstrate potential for diversification and revenue growth, particularly as demand recovers for more advanced and complex technologies.
Teradyne Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Teradyne's revenue will grow by 13.2% annually over the next 3 years.
- Analysts assume that profit margins will increase from 16.6% today to 23.2% in 3 years time.
- Analysts expect earnings to reach $952.0 million (and earnings per share of $6.28) by about September 2028, up from $469.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.1 billion in earnings, and the most bearish expecting $684.8 million.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 24.0x on those 2028 earnings, down from 39.0x today. This future PE is lower than the current PE for the US Semiconductor industry at 33.5x.
- Analysts expect the number of shares outstanding to decline by 2.33% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 9.98%, as per the Simply Wall St company report.
Teradyne Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Tariffs and trade policies are creating uncertainty among Teradyne's customers in the mobile, automotive, and industrial segments, potentially reducing demand and impacting future revenue projections.
- Limited visibility beyond the second quarter due to geopolitical factors might lead to unpredictability in earnings and revenue forecasts.
- Robotics revenue has declined both sequentially and year-over-year, with challenging macro conditions being a persistent headwind, potentially affecting net margins and operational outcomes.
- Fluctuating product mix and volume could lead to variations in gross margins, especially concerning future semiconductor test needs and possible shifts in demand for HBM test capacity.
- The continuity of economic factors such as tariffs and trade policy might impact not only end market demand but also cost structures, thereby affecting net profit margins and overall financial performance.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $116.062 for Teradyne based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $133.0, and the most bearish reporting a price target of just $85.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.1 billion, earnings will come to $952.0 million, and it would be trading on a PE ratio of 24.0x, assuming you use a discount rate of 10.0%.
- Given the current share price of $115.07, the analyst price target of $116.06 is 0.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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