Teradyne Plummets 5.75%: Overvaluation Concerns and Earnings Optimism Collide

Summary
• Teradyne (TER) plunges 5.75% to $168.95, breaking below its 52-week low of $65.77
• Analysts flag $172.63 fair value estimate as 5% downside to current price
• Q3 earnings beat and new CFO appointment fail to offset overvaluation debate
• Options chain surges with 219% price change on 11/21 put contracts

Teradyne’s sharp intraday selloff reflects a tug-of-war between bullish earnings momentum and bearish valuation concerns. Despite a 39% rally in the last month and a $1.12B buyback program, the stock’s 5.75% drop highlights investor skepticism about whether fundamentals justify the 70%+ year-to-date gain. With the options market pricing in 53.74% implied volatility and sector peers like AMAT (-3.33%) underperforming, the path forward hinges on whether demand resilience or macro risks dominate.

Fair Value Estimate Sparks Profit-Taking Amid Earnings Optimism
The $172.63 fair value estimate from Simply Wall St, 5% below the current price, has triggered profit-taking despite Teradyne’s Q3 earnings beat and upgraded guidance. While management raised December quarter forecasts and announced Michelle Turner as CFO, the market is recalibrating after a 70% surge in the past year. Analysts highlight risks from trade policy uncertainty and robotics sector headwinds, which could pressure margins if demand softens. The 5.75% drop also reflects a broader sector correction, with semiconductor equipment peers like AMAT (-3.33%) dragging down momentum.

Semiconductor Equipment Sector Volatility as AMAT Drags Down
The semiconductor equipment sector, led by Applied Materials (AMAT) at -3.33%, is under pressure from macroeconomic concerns and trade policy uncertainty. While Teradyne’s robotics and test systems business outperformed in Q3, the sector’s 20.6% year-to-year sales growth in July (per SIA) contrasts with Teradyne’s 5.75% intraday drop. AMAT’s weakness underscores broader fears about capital spending cycles, with Teradyne’s 66.85x P/E ratio (vs. sector average ~35x) amplifying sensitivity to valuation shifts.

Options Playbook: Capitalizing on Volatility with Put Contracts
• RSI: 71.09 (overbought)
• MACD: 12.308 (bullish divergence)
• 200D MA: $106.13 (far below current price)
• Bollinger Bands: $123.41 (lower band) vs. $168.95 (current price)

Teradyne’s technicals suggest a short-term bearish bias despite long-term bullish fundamentals. Key support levels at $144.29 (30D) and $113.42 (200D) could trigger further declines if the 5.75% drop accelerates. The options chain offers two high-leverage plays: TER20251121P160 and TER20251121P165, both with implied volatility above 50% and leverage ratios exceeding 40%.

TER20251121P160
• Code: TER20251121P160
• Type: Put
• Strike: $160
• Expiry: 2025-11-21
• IV: 56.14% (high volatility)
• Leverage: 73.51% (high reward)
• Delta: -0.248 (moderate sensitivity)
• Theta: -0.074 (time decay)
• Gamma: 0.021 (price sensitivity)
• Turnover: 45,987 (liquid)

TER20251121P165
• Code: TER20251121P165
• Type: Put
• Strike: $165
• Expiry: 2025-11-21
• IV: 54.21% (high volatility)
• Leverage: 44.49% (moderate reward)
• Delta: -0.367 (higher sensitivity)
• Theta: -0.022 (low time decay)
• Gamma: 0.026 (price sensitivity)
• Turnover: 11,875 (liquid)

Payoff Analysis:
• TER20251121P160: At a 5% downside to $160.50, payoff = $0.50 (50 cents).
• TER20251121P165: At $159.99, payoff = $5.01 (501 cents).

Why These Contracts?
TER20251121P160 offers a high leverage ratio (73.51%) and moderate delta (-0.248), ideal for a 5% downside scenario. TER20251121P165, with higher delta (-0.367) and gamma (0.026), benefits from larger price swings. Both contracts are liquid (turnover >10,000) and priced in a 50-70% IV sweet spot. Aggressive bears may consider TER20251121P160 for a short-term play if $160 breaks, while TER20251121P165 offers a safer entry if the stock stabilizes near $165.

Backtest Teradyne Stock Performance
Key Take-aways 1. Frequency & effect: Since 2022, TER has logged 55 separate -6 % (or worse) intraday plunges. None of the post-event horizons out to 30 days produced a return that was both positive and statistically significant. Cumulative P-L after 30 days is –2.38 % vs +1.63 % for simply holding the stock. 2. Hit-rate: Only ~46-61 % of events finished in the green at any point in the 30-day window—no clear bullish edge. 3. Risk-reward: Drawdowns after the events were modest on average, but so were rebounds; the distribution of outcomes is symmetrical and dominated by general market drift. 4. Implication: Buying immediately after a –6 % intraday drop in TER has not been a reliable alpha source. A rules-based strategy would likely need additional filters (e.g., macro regime, valuation, oversold indicators) before deployment.You can inspect the full interactive event-study dashboard—including per-event equity curve, distribution of returns, and optimal holding-period statistics—below.Feel free to open the module for deeper drill-downs, or let me know if you’d like to layer on further filters or compare against additional tickers/thresholds.

Act Now: Short-Term Volatility vs. Long-Term Resilience
Teradyne’s 5.75% drop reflects a critical juncture between short-term valuation concerns and long-term earnings momentum. While the $172.63 fair value estimate and sector volatility (AMAT -3.33%) suggest near-term weakness, the stock’s 39% monthly rally and $1.12B buyback program indicate resilience. Investors should monitor the 200D MA at $106.13 as a key support level and watch for catalysts like the November 3 CFO transition. For aggressive traders, TER20251121P160 offers a high-leverage play on a 5% downside, while sector leaders like AMAT (-3.33%) highlight broader risks. Action: Short-term sellers may target $160, while long-term bulls should wait for a $144.29 (30D) rebound before re-entering.