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Teradyne Inc TER

Morningstar Rating
$91.24 −0.69 (0.75%)
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Company Report

Teradyne Earnings: 2024 Rebound Is Coming Slowly, but Shares Remain Tremendously Undervalued

We lower our fair value estimate for shares of wide-moat Teradyne to $147, from $157, after it reported a quarter in line with our expectations but provided weaker forward-looking commentary. Teradyne's primary semiconductor testing market continues to be weighed down by low smartphone demand and a precipitous downturn in the memory chip market. We think the overall chip test market has troughed and view management's outlook for growth in 2024 positively even as management's commentary was more tepid than we'd hoped. Teradyne's chip exposure opens it up to cyclicality as we've seen the past two years, but we are undeterred in expecting long-term growth drivers toward higher chip complexity over the course of these cycles. Teradyne is well-positioned to profit from a cyclical rebound in our view, and we continue to see the firm as the preeminent player in chip test with a durable wide economic moat. Despite our fair value trim, we see shares as deeply undervalued. Current prices imply practically no rebound from Teradyne's cyclical trough, and we see improving demand as a catalyst in 2024.

Price vs Fair Value

TER is trading within a range we consider fairly valued.
Price
$91.24
Fair Value
$787.00
Uncertainty
High
1-Star Price
$179.58
5-Star Price
$25.70
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

We think Teradyne’s depth, breadth, and steep investment in chip testing capabilities form structural competitive advantages that would be extremely difficult to replicate.

Bears

We expect continued head-to-head competition with Advantest to be a headwind to Teradyne’s growth and profitability.

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News

Trading Information

Previous Close Price
$91.93
Day Range
$90.5391.98
52-Week Range
$81.08119.20
Bid/Ask
$90.57 / $92.55
Market Cap
$13.95 Bil
Volume/Avg
1.1 Mil / 1.5 Mil

Key Statistics

Price/Earnings (Normalized)
29.82
Price/Sales
9.74
Dividend Yield
0.48%
Dividend Yield (Forward)
0.48%
Total Yield
2.98%

Company Profile

Teradyne provides testing equipment, including automated test equipment for semiconductors, system testing for hard disk drives, circuit boards, and electronics systems and wireless testing for devices. The firm entered the industrial automation market in 2015, into which it sells collaborative and autonomous robots for factory applications. Teradyne serves numerous end markets and geographies directly and indirectly with its products, but its most significant exposure is to semiconductor testing. Teradyne serves vertically integrated, fabless, and foundry chipmakers with its equipment.
Sector
Technology
Industry
Semiconductor Equipment & Materials
Stock Style Box
Mid Core
Total Number of Employees
6,500

Competitors

Valuation

Metric
TER
KEYS
LRCX
Price/Earnings (Normalized)
29.8216.0923.27
Price/Book Value
5.764.9511.66
Price/Sales
9.744.386.05
Price/Cash Flow
23.9116.2820.80
Price/Earnings
TER
KEYS
LRCX

Financial Strength

Metric
TER
KEYS
LRCX
Quick Ratio
1.832.591.88
Current Ratio
3.283.663.06
Interest Coverage
233.2818.5524.15
Quick Ratio
TER
KEYS
LRCX

Profitability

Metric
TER
KEYS
LRCX
Return on Assets (Normalized)
11.67%18.15%21.81%
Return on Equity (Normalized)
16.47%34.45%51.05%
Return on Invested Capital (Normalized)
15.57%23.61%31.56%
Return on Assets
TER
KEYS
LRCX

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