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A Craig-Hallum analyst downgraded Teradyne (NASDAQ:TER) to Hold from Buy and lowered the firm’s price target to $96 from $138 in a note to clients Thursday.
The analyst said Teradyne, an automatic test equipment designer, and manufacturer, was downgraded as mobile and consumer markets weaken.
“Teradyne guided Q3 and the remainder of the year well below expectations as the company sees softening smartphone and consumer markets materially impacting its outlook,” said the analyst. “The company now sees the 2022 SoC semiconductor test TAM to be ~$4.2-$4.6 billion, down from expectations a quarter ago of near $5.0 billion. The company is also seeing headwinds in its Industrial Automation business from COVID lockdowns in China, distributor staffing shortages in the U.S., and FX headwinds from a weakened Euro.”
The analyst explained that while the company has short lead times, which can lead to an aggressively cyclical business, they believe the company will recover on the back side of the current market adjustment, but with a lack of visibility as to when and the magnitude of, a cyclical recovery they lowered the multiple they were previously using to value the company on its long-term EPS power of $8.
“Given the lack of visibility we are stepping to the sidelines and downgrading shares to a Hold with a $96 price target. Our price target is based on 12x the company’s long-term EPS power (down from our previous ~17x P/E price target multiple),” concluded the analyst.
Despite an earlier fall, Teradyne shares are up 0.6% Thursday.
