UPDATE: UBS Double Upgrades Teradyne (TER) to Buy

October 28, 2021 4:57 AM EDT
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Price: $158.55 +3.89%

Rating Summary:
    17 Buy, 6 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 20 | Down: 18 | New: 45
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(Updated - October 28, 2021 4:57 AM EDT)

UBS analyst Timothy Arcuri upgraded Teradyne (NASDAQ: TER) from Sell to Buy with a price target of $140.00 (from $100.00).

The analyst comments "New disclosure around its customer exposure this year leads us to conclude that AAPL - TER's biggest customer - is now de-risked and thus why we can no longer justify our Sell. At the same time, tailwinds in the core SOC test market (~60% of rev) should remain firm in 2022/2023. On top of this, the slowdown in Moore's Law is causing the industry to have to spend more on test and the rise of AI and 5G is driving a big inflection in demand for compute (a dynamic we have written about extensively in the past) and this compute must be tested. Lastly, we are bullish on Teradyne's share gain opportunity in these markets as it has historically had a weak position in testing x86 compute (AMD/INTC) but a big piece of this new compute will be met by new non x86 architectures for which Teradyne seems well positioned to capture. Beyond semi test, there is also a push to do more testing at the system level in addition to the chip level and Teradyne's system test franchise is well positioned there too. Lastly the Industrial Automation business has been more of a mixed bag as Teradyne invests aggressively, but it has a strong franchise, the opportunity pool is very deep given the increased penetration of robotics in a host of growing verticals, and the business adds some optionality in terms of valuation. Given our view that AAPL is de-risked and realization that the non-AAPL test market is growing much faster than we thought, we are significantly raising estimates and applying the same ~22x multiple to the same basis of C22/23E avg EPS. This is also justified by a SOTP that comps Teradyne's test businesses to Advantest and Keysight. Putting this all together, we raise our PT from $100 to $140 and upgrade from Sell to Buy."

For an analyst ratings summary and ratings history on Teradyne click here. For more ratings news on Teradyne click here.

Shares of Teradyne closed at $123.07 yesterday.


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