Teradyne Earnings: Semi Test Recovery Thesis Intact, but Weaker Auxiliary Markets Lower FVE to $157

We trim our fair value estimate for wide-moat Teradyne to $157 per share, from $167, behind lower short-term expectations for the firm's nonchip testing segments. First-quarter results were stronger than we expected, thanks to supply and demand upside in the majority semiconductor test segment. Conversely, declines for the wireless and system test businesses in 2023 now appear steeper than we had previously forecast. We retain our thesis for Teradyne's results to bottom out in 2023 and see an immense rebound in 2024 behind reinvigorated chip test demand. Management reiterated its 2026 target model, which includes double-digit compound annual growth and aligns with our forecast. Investors will require patience for 2023, but we reaffirm our belief that shares of this testing behemoth are seriously undervalued.