Teradyne Navigates Short-Term Headwinds Well, and Our Long-Term View Remains Bullish; Shares Cheap

We are maintaining our $172 fair value estimate for Teradyne after the company's first-quarter results and second-quarter guidance met our expectations. Teradyne is weathering weakness due to product delays at TSMC, its largest customer, but we continue to view this as a short-term pushing out of demand and remain confident in the firm’s long-term model. Outside of TSMC, we think broad demand for Teradyne’s testing equipment is very strong. We also are pleased with how the firm is navigating supply constraints and regional COVID-19 shutdowns. We think Teradyne will benefit in the long term from increasing chip complexity for new applications and view it in a position to capitalize on demand with its leading technology, which is reflected in our wide moat rating. The shares appear materially undervalued to us, as we think the market reaction to TSMC delays has been myopic.