Why This Teradyne Analyst Is Turning Bullish

Teradyne Inc TER shares have gained close to 16% over the past month.

While the company expects mobility to support future growth, this may not materialize, while it faces competition in the data center market from Advantest Corp ATEYY, which is better positioned, according to BofA Securities.

The Teradyne Analyst: Vivek Arya downgraded the rating for Teradyne from Neutral to Underperform, while keeping the price target unchanged at $100.

The Teradyne Thesis: Even with Apple Inc AAPL adopting the 3nm process for A17 processors in its latest iPhone, Teradyne’s mobility total addressable market has shrunk by around 40% year-on-year, Arya said in the downgrade note.

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“We continue to see risk of slow, prolonged adoption of 3nm testing equipment that could result in re-use of existing equipment,” the analyst wrote. “Plus, as development costs of leading-edge chips rise, it could lead to delayed adoption of 2nm processors,” he added.

“TER’s robotics/cobot exposure (15% of sales) is an expensive distraction and we see no synergies with the core testing business,” Arya stated. “TER is less exposed to rising investment in assembly/packaging,” he further added.

TER Price Action: Shares of Teradyne had dropped 0.22% at market close to $105.16 at the time of publication on Friday.

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