Teradyne Earnings: We Maintain Our Long-Term Recovery Thesis and Fair Value Following Good Quarter

We maintain our $157 fair value estimate for Teradyne after the firm reported good second-quarter results amid the throes of a chip downturn. Teradyne raised its view of the overall chip testing market for 2023. While we still expect weak results through 2023, a more positive outlook for the second half supports our belief in a strong rebound to begin in 2024. However, the firm’s robotics business is struggling in 2023 and weighing on overall results. The chip business is the primary driver of results and our long-term thesis on Teradyne. We reiterate our view that Teradyne has sold off excessively on a chip downturn and that current levels provide strong upside for investors. Teradyne is a behemoth in chip testing, which earns it a wide moat and positions it well for secular growth through cycles. The shares continue to look cheap to us.