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Teradyne Inc TER Stock Quote

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Morningstar‘s Stock Analysis TER

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Is it the right time to buy or sell?

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Teradyne Shares Are Pricing in Downside, Ignoring Long-Term Upside; Shares Deeply Undervalued

Analyst Note

| William Kerwin |

We maintain our $167 fair value estimate for wide-moat Teradyne after it reported upside in third-quarter results and guided in line with our expectations. Teradyne continues to suffer from a worsening chip market. We maintain our expectations for soft semiconductor demand to impact the firm’s revenue through the first half of 2023 and for a meaningful snapback in 2024. While short-term results are poor, we are confident in the durability of demand—even while being pushed out. We view slower orders as reflecting near-term demand weakness and not a departure from chipmakers’ long-term capacity or capital investment plans. Teradyne’s equipment is vital for chip production, particularly for advanced chips that sell into high-end smartphones and computing. We see product ramps in 2023 and 2024 driving a return to growth. Shares rose 6% in early market trading despite low guidance, and we think downcycle risk is already entirely priced in. We see significant upside and view Teradyne’s current valuation as ignoring a chip market rebound at any point in the future.

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Key Statistics TER

Company Profile TER

Business Description

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, which made up 71% of 2021 sales. Teradyne serves vertically integrated, fabless, and foundry chipmakers with its equipment.

600 Riverpark Drive
North Reading, MA, 01864
T +1 978 370-2700
Industry Semiconductor Equipment & Materials
Most Recent Earnings Sep 30, 2022
Fiscal Year End Dec 31, 2022
Employees 5,900