20% Upside Seen For Cohu Shares As Needham Takes A Bullish View

Shares of Cohu, Inc. COHU gained more than 10 percent Monday morning and hit a new 52-week high of $22.84 — in part due to an upgrade by analysts at Needham. The firm's Y. Edwin Mok upgraded Cohu's stock rating from Hold to Buy with a newly established $24 price target amid multiple drivers ahead.

Cohu, a supplier of semiconductor test and inspection handlers and other test modules, boasts the highest level of exposure to the growing Auto IC space, Mok commented in his upgrade note. In fact, auto IC sales are expected to consistently grow at a 4 to 6 percent rate over the next few years company's differentiated technical capabilities, especially in thermal, could result in new contract wins.

Cohu is also well positioned to gain market share in both handlers and contactors, which is the company's core business, Mok continued. Within the handlers segment, Cohu is winning new positions at a diversified Korean chip maker and at a new European Auto IC customer. and these wins alone will add approximately two points of handler share. Within the contactor segment, the company's exposure while small at $40 million or 11 percent of total sales, there is room for a 20 percent growth rate over the coming years (see Mok's track record here).

Finally, Cohu's recently launched new products, including the WLCSP prober, inspection module, and system-level test solution, are individually small at around $10 million in sales each. However, these new products also represents a diversified product portfolio and exceed management's own conservative projections.

At time of publication, shares of Cohu were up 13.45 percent at $22.73.

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