A Better Story Taking Shape At FormFactor

Leading probe card company FormFactor (NASDAQ:FORM) has had a mixed run since I last wrote about the company in August of 2016. While most companies tied into the equipment side of the semiconductor sector have done well (Applied Materials (NASDAQ:AMAT) is up almost 60% and KLA-Tencor (NASDAQ:KLAC) is up more than 35%), FormFactor's 16%-plus move is less inspiring and particularly so after a 20% decline since early June.

Looking ahead, though, I believe there are some reasons to consider this name. Although I would have preferred to see Cascade's management running this company, the combination of FormFactor and Cascade is still a “stronger together” situation, and I expect the company to log mid single-digit revenue growth on the back of expanding use of advanced packaging and greater demand for chips in mobile and auto applications. FormFactor's ability to execute and generate sustained growth has yet to be proven, but mid-teens operating margins could support a fair value in the low-to-mid teens.

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A Better Story Taking Shape At FormFactor