On Monday, JPMorgan (NYSE:JPM) analyst updated the rating for Teradyne (NASDAQ:TER), a leading provider of automated test equipment, from Neutral to Overweight, setting a new price target of $158.00. The upgrade reflects the analyst's confidence in Teradyne's growth potential, driven by substantial market expansion in various sectors.
The analyst highlighted improvements in the Very-Important-Person (VIP) Application-Specific Integrated Circuit (ASIC) Total (EPA:TTEF) Addressable Market (TAM), Memory TAM, and Mobility TAM. These improvements are expected to position Teradyne favorably to meet its 2026 financial targets, possibly reaching the higher end of its projected range.
The semiconductor test equipment maker's TAM is projected to grow from $5.6 billion in 2024 to $6.4 billion in 2025 and further to $7.6 billion in 2026. The growth is attributed to the VIP ASIC sector, enhanced smartphone unit recovery, and the transition to leading-edge technology nodes, as well as developments in both the Memory TAM and the High Bandwidth (NASDAQ:BAND) Memory (HBM) market.
Teradyne's revenue growth is anticipated to accelerate, with a low-20% increase in 2025 and a high-20% rise in 2026. The analyst forecasts Teradyne's revenues to reach approximately $4.4 billion in 2026, aligning with the upper end of its previously stated target range of $3.9 billion to $4.6 billion. The earnings per share (EPS) for 2026 are estimated at $6.75, towards the higher end of the company's projected EPS range of $5.50 to $7.50.
The report suggests that the earlier 2026 targets, which seemed ambitious, are now more attainable due to the growth in the Mobility TAM and better utilization of the ASIC and HBM TAMs. With Teradyne's shares currently trading at 18 times the forecasted 2026 EPS, the analyst believes there is significant potential for stock price appreciation, considering the long-term trading multiple of 23 times.
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