Teradyne, Inc.

TER Details

Teradyne, Inc. (NASDAQ: TER) is a prominent global test and industrial automation equipment provider for many industries, including consumer electronics, wireless, industrial, computing, communications, aerospace and defense. TER designs, and sells automatic test systems used to test semiconductors, wireless products, and other complex electronics systems.

Latest News:

• Dividend Declaration: On November 08, 2021, TER declared a quarterly cash dividend of USD 0.10 per common share, payable on December 17, 2021, to shareholders of record on November 24, 2021.
• New Partnership Contracts: On October 13, 2021, LitePoint, a wholly-owned subsidiary of TER, announced a collaboration with Microchip Technology Inc., a provider of Bluetooth and Wi-Fi Integrated Circuits, to provide simplified design validation and turnkey manufacturing test solutions for next-generation Internet of Things (IoT) systems based on Microchip's Bluetooth and Wi-Fi chipsets.

9MFY21 Results:

• Growth in Topline: The company's total revenues rose 19.27% during 9MFY21 (ended October 03, 2021) to USD 2.82 billion from USD 2.36 billion during 9MFY20 (ended September 27, 2020), driven by an increase in sales in both products and services segments.
• Boost in Bottomline: The net income during 9MFY21 was USD 790.55 million vs. USD 587.82 million reported during 9MFY20.
• Strong Balance Sheet: As of October 03, 2021, the company's cash and cash equivalents (including marketable securities) stood at USD 1.31 billion, with a total debt of USD 145.00 million.

Key Risks:

• Customer Concentration Risk: In FY20, FY19, and FY18, the company's five largest direct clients provided 36%, 27%, and 27% of consolidated revenues, respectively. As a result, a company's long-term financial health may be jeopardized if it relies on a few customers for revenue.
• Shortage of Raw Material: Some components, such as semiconductor chips, may be in short supply from time to time due to high industry demand or some suppliers' failure to regularly meet quality or delivery criteria. As a result, the company risks losing time-sensitive customer orders if one of its suppliers cancels contracts or fails to meet product quality specifications, resulting in a financial downturn.

Outlook:

• Q4FY21 Estimates: TER forecasts Q4FY21 revenues to be in the range of USD 820 - 900 million as of October 26, 2021. It expects its GAAP net income of USD 1.08-1.33 per diluted share and non-GAAP net income of USD 1.14-1.40 per diluted share.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

TER Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

TER's share price has surged 32.13% in the past three months and made a new 52-week high today. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 72.30, indicating an overbought zone. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 135.84

Considering the uptick in the stock price and technical indicators, we believe the decent business fundamentals are adequately reflected at trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 158.22, up 3.50% as of December 01, 2021, 10:18 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

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