Teradyne: Still a Buy, but Patience is Wearing Thin

Teradyne, Inc. (NASDAQ:TER) is rated a Buy despite the robotics unit's underwhelming performance. The core semi test business has shown signs of improvement. However, patience is wearing thin as the company's revenue growth has been slow.

Teradyne, Inc. (TER), a leading manufacturer of semiconductor test equipment and industrial robots, has seen its shares fall amidst market uncertainty sparked by a cautious outlook from ASML, a key player in the semiconductor industry [1]. Despite the recent sell-off, the company maintains a "Buy" rating from several analysts, including UBS, which has increased its price target to $120 [2]. This article examines the latest developments and challenges facing Teradyne.

Teradyne's stock has been volatile, with the company experiencing a 29.9% decline since the beginning of 2025. The recent 3.4% drop follows a broader market sell-off triggered by ASML's warning about potential growth slowdowns due to macroeconomic and geopolitical uncertainties [1]. Analysts at UBS have maintained a positive outlook, anticipating second-quarter results in line with expectations and providing positive guidance for the third quarter [2].

The semiconductor testing business, which accounts for a significant portion of Teradyne's revenue, has shown signs of improvement. For the first quarter of 2025, Teradyne reported revenue of $686 million, with non-GAAP earnings per share (EPS) of $0.75, exceeding expectations. The company's gross margin was 60.6%, also above guidance [2]. However, the robotics division has faced challenges, including a 4% year-over-year decline in product test revenue and an operating loss of $22 million [2].

Teradyne's stock has been impacted by concerns about its positioning in high-growth markets, such as AI and autonomous vehicles. Goldman Sachs has raised concerns about Teradyne's growth prospects, citing a lack of positioning in the high-growth market for testing merchant GPUs and cyclical weakness in industrial markets [1]. Despite these challenges, analysts remain optimistic about Teradyne's long-term prospects, with an average one-year price target of $96.54 and a consensus recommendation of "Outperform" [2].

The company's recent Q1 earnings report highlighted both positive and negative points. On the positive side, Teradyne secured a significant HBM 4 performance test win with a major DRAM manufacturer and received the largest order in its history from a global automotive manufacturer for its robotics division [2]. The company also increased its share buyback target from $400 million to up to $1 billion through the end of 2026, reflecting confidence in its long-term plans and free cash flow generation [2].

However, the outlook for Teradyne remains uncertain. The company's visibility beyond the second quarter is very limited, and trade policy and customer uncertainty around end market demand have caused order pushouts, particularly affecting the auto and industrial segments [2]. The wireless test end market for Teradyne's LitePoint business has also been weak since 2023 [2].

In conclusion, while Teradyne faces challenges in its robotics division and broader market uncertainties, the company's core semi test business has shown signs of improvement. Analysts remain optimistic about Teradyne's long-term prospects, with a "Buy" rating and increased price targets. However, investors should exercise patience as the company navigates these challenges.

References:
[1] https://ca.finance.yahoo.com/news/amkor-teradyne-shares-plummet-know-153620067.html
[2] https://www.gurufocus.com/news/2989579/ubs-analyst-revises-teradyne-ter-price-target-to-120-ter-stock-news