Teradyne Earnings: We Maintain Our Recovery Thesis and Valuation After Positive Results

We affirm our $135 fair value estimate for wide-moat Teradyne as we maintain our longer-term recovery thesis following good first-quarter results. Teradyne’s March-quarter results and second-quarter guidance beat our expectations, but management continues to issue conservative guidance for the back half of 2024. We’re pleased with Teradyne’s ability to benefit from generative artificial intelligence chip spending, but we think its core mobile phone chip market will be weak through the rest of the year. We believe Teradyne’s current sales levels are well below what we consider normal demand, but we don’t expect a significant rebound in 2024. We’ve also lost some confidence in management’s outlook for a longer-term recovery and forecast Teradyne to miss its 2026 sales target. We continue to think shares are undervalued but don’t see meaningful catalysts for the stock until 2025.