Teradyne Earnings: We Push Out Our Recovery Thesis and Lower Our Valuation

We lower our fair value estimate for wide-moat Teradyne to $135 per share, from $147, as we push out our forecast for a demand recovery. Teradyne’s results met our expectations but first-quarter guidance and 2024 commentary was significantly weaker than our model. We continue to believe that Teradyne’s current demand is well below healthy levels and will normalize eventually, but we're no longer confident this will occur in the short term. We now only expect modest growth in 2024. Our wide moat rating is intact, and we believe that when demand does return, particularly for mobile phone chip testing, Teradyne is well positioned to capitalize on it with a robust portfolio. Even as we temper our bullishness on the name and lower our short-term expectations, we see shares as undervalued against the firm’s strong competitive position and long-term opportunity. We just no longer see significant catalysts to the stock in 2024.