Investing.com -- Shares in Teradyne jumped more than 6% in premarket trading Thursday after the stock received an upgrade at JPMorgan, with the bank’s analysts flagging an attractive entry point following a nearly 20% post-earnings selloff.

“We are upgrading shares of Teradyne to Overweight following the ~20% postearnings pullback in the stock, with the lumpiness in customer purchasing of test equipment driving limited changes to the long-term drivers and secular catalysts,” analyst Samik Chatterjee said.

The bank maintained its December 2026 price target of $400, implying about 31% upside from Wednesday’s close of $306.33.

The upgrade rests on four drivers: growing demand for merchant GPU testing, proliferation of custom AI chips developed by hyperscalers and so-called Neoclouds, a rising memory test opportunity tied to HBM complexity and new fab buildouts, and an emerging silicon photonics and co-packaged optics testing business.

Chatterjee sees the revenue opportunity from merchant GPU dual-sourcing alone reaching approximately $1.2 billion by 2028, up from around $50 million guided for 2026, as Teradyne builds share from low-single digits toward 30% over a three-year horizon.

The analyst described the memory segment as "the most underappreciated near-term upside vector," pointing to greenfield fab deployments from Samsung, SK Hynix, and Micron as a source of capacity-driven demand not yet reflected in consensus estimates. JPMorgan forecasts memory test revenue of $1.1 billion by 2028.

The bank also raised its 2026 adjusted EPS estimate to $7.00 from $6.65, and lifted its 2027 estimate to $9.80 from $9.50. It projects earnings growth of roughly 40% in both 2027 and 2028, following approximately 80% growth in 2026.

Execution risks remain, including the possibility that Teradyne falls short of its $6 billion revenue target even if the broader ATE test market reaches $12 billion in 2027, due to uncertainty around merchant GPU market share.

However, Chatterjee believes the upside to the shares “will stem from reaching the $6bn revenue target in relatively short order beyond 2027 with lower than 25% share in the merchant GPU test market on account of upsides in other parts of ATE TAM.”

JPMorgan’s updated forecasts point to earnings growth of 40% in both 2027 and 2028, following 80% growth in 2026, which Chatterjee said justifies a valuation multiple of 35x to 40x, reflecting the strong earnings outlook alongside the acknowledged lumpiness and limited near-term visibility of the business.