Teradyne Still On Fire, With 5G And Memory Test Chipping In

Even by the standards of semi equipment, Teradyne (TER) has been on a tear, with the shares more than doubling over the past year (compared to the paltry nearly 70% gain at Applied Materials (AMAT) and 75% gain at ASML Holding (ASML)). Then again, with Advantest (OTCPK:ATEYY) up about 180% and FormFactor (FORM) up more than 100% as well, it’s pretty safe to say that the wafer testing market has been a good place to be, as demand from logic customers has definitely improved heading into 2020.

Sustainability and valuation were my primary concerns going into this quarter, and they remain my primary concerns. Management’s guidance suggests a year weighted to the first half, and it may well prove to be the case that 5G demand in China was artificially elevated by concerns about future restrictions on access (essentially pulling demand forward). As far as valuation goes, I know growth and momentum investors won’t care, but it’s tough to reconcile today’s price with a reasonable set of long-term growth expectations. The best I can do is to say that, within the spectrum of where semi equipment stocks trade today, the company’s valuation is not so unreasonable. Make of that what you will.

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Teradyne Still On Fire, With 5G And Memory Test Chipping In