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North Reading, Massachusetts-based Teradyne, Inc. designs, develops, manufactures, and sells automated test systems and robotics products worldwide. With a market cap of $20.3 billion, Teradyne operates through Semiconductor Test, System Test, Robotics, and Wireless Test segments.
Companies worth $10 billion or more are generally described as "large-cap stocks," Teradyne fits right into that category, with its market cap exceeding this threshold, reflecting its substantial size, influence, and dominance in the semiconductor equipment & materials industry. It serves several high-profile customers, including Samsung, Qualcomm , Intel , Analog Devices , and Texas Instruments .
Teradyne touched its 52-week high of $163.21 on July 16 and is currently trading 21.7% below that peak. TER has dipped 15.7% over the past three months lagging behind the Nasdaq Composite’s ($NASX) 1.6% decline during the same time frame.
However, over the longer term, Teradyne has outperformed NASX. TER gained 32.1% over the past 52 weeks and 17.8% in 2024, outpacing NASX’s 28.2% gains over the past year and 17.1% returns on a YTD basis.
To confirm the longer-term bullish trend and recent downturn, TER has traded above its 200-day moving average since mid-December with slight fluctuations and below its 50-day moving average since late July.
TER stock has exhibited significant volatility over the past period and has a 60-month beta of 1.49. The recent decline in TER stock prices can be partly attributed to the broader downturn in tech stocks over the past few weeks.
Nevertheless, Teradyne has consistently delivered better-than-expected results in recent quarters. In the latest quarterly report, the company exceeded both management guidance and Wall Street expectations. Its net revenues for Q2 rose by 6.6% annually to $729.9 million. This growth was primarily driven by a 14% year over year increase in Semiconductor Test revenues, hitting $543 million, fueled by continued strength in memory and a recovery in demand for SoC.
Furthermore, Teradyne’s net income surged by 55.2%, totaling $186.3 million. The company’s adjusted EPS of $0.86 surpassed consensus estimates by 13.2%.
Teradyne’s competitor, Keysight Technologies, Inc. , has underperformed TER over the past year. KEYS gained 13.2% over the past year and has dipped 5.6% on a YTD basis.
Among the 16 analysts covering the TER stock, the consensus rating is a “Moderate Buy.” The mean price target of $146.81 suggests a potential upside of 14.8% from current price levels.
On the date of publication, Aditya Sarawgi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The S&P 500 Index Wednesday closed down by -0.29%, the Dow Jones Industrials Index closed down by -0.25%, and the Nasdaq 100 Index closed down by -0.45%.
Stocks on Wednesday gave up mid-session gains and turned lower as hawkish comments from Fed Chair Powell pushed bond yields higher and sparked the selling of chip stocks when he said the Fed was in no rush to ease monetary policy.
Stocks initially rallied Wednesday afternoon, with the S&P 500 and Dow Jones Industrials climbing to new record highs and the Nasdaq 100 climbing to a 3-week high. The FOMC’s decision Wednesday to cut the fed funds target range by -50 bp and project another -50 bp worth of rate cuts by year-end pushed stock prices higher. Also, Wednesday’s US housing starts and building permits reports were better than expected, bolstering the prospects for a soft landing and supporting stocks.
The FOMC voted 11-1 to cut the federal funds target range by -50 bp to 4.75%-5.00% and said the committee is "strongly committed to supporting maximum employment" and returning inflation to its 2% goal.
The FOMC cut its federal funds forecast for the end of 2024 to 4.375% from 5.125% in June, implying another 50 bp of rate cuts by the end of the year.
The FOMC cut its 2024 US GDP forecast to +2.0% from +2.1% in June and cut its 2024 core PCE estimate to +2.6% from +2.8% in June. The FOMC also raised its 2024 unemployment forecast to 4.4% from 4.0% in June.
Fed Chair Powell said, "We made a good, strong start" by cutting rates by 50 bp Wednesday, and the Fed is "squarely focused" on its dual mandate of inflation and employment. He added that the Fed is not in a rush to ease policy and "we will move as fast or as slow" as policymakers consider appropriate based on the data.
US MBA mortgage applications rose +14.2% in the week ended September 13, with the purchase mortgage sub-index rising +5.4% and the refinancing mortgage sub-index rising +24.2%. The average 30-year fixed rate mortgage fell -14 bp to a 2-year low of 6.15% from 6.29% in the prior week.
US Aug housing starts rose +9.6% m/m to a 4-month high of 1.356 million, stronger than expectations of 1.318 million. Aug building permits, a proxy for future construction, rose +4.9% m/m to a 5-month high of 1.475 million, stronger than expectations of 1.410 million.
The markets are discounting the chances at 100% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 36% for a -50 bp rate cut at that meeting.
Overseas stock markets Wednesday settled mixed. The Euro Stoxx 50 closed down -0.52%. China's Shanghai Composite recovered from a 7-1/4 month low and closed up +0.49%. Japan's Nikkei Stock 225 closed up +0.49%.
Interest Rates
December 10-year T-notes (ZNZ24) Wednesday closed down -9.5 ticks. The 10-year T-note yield rose +4.1 bp to 3.687%. Dec T-notes Wednesday fell to a 1-week low, and the 10-year T-note yield rose to a 1-week high of 3.173%. T-notes were under pressure Wednesday on negative carryover from a slide in European government bonds to 1-week lows. T-notes also fell on Wednesday’s stronger-than-expected US Aug housing starts and building permits reports. In addition, rising inflation expectations are bearish for T-notes after the 10-year breakeven inflation rate Wednesday rose to a 2-week high of 2.166%.
T-notes erased their losses and briefly moved higher Wednesday afternoon after the FOMC cut the federal funds target range by -50 bp and projected another -50 bp of rate cuts this year. Also, the action by the FOMC to cut its US 2024 GDP forecast and its core PCE price estimate were bullish for T-notes. However, T-notes gave up their gains and fell to their lows Wednesday afternoon after Fed Chair Powell said the Fed is in no rush to ease monetary policy.
European government bond yields on Wednesday moved higher. The 10-year German bund yield climbed to a 1-week high of 2.195% and finished up +4.7 bp to 2.190%. The 10-year UK gilt yield rose to a 1-week high of 3.854% and finished up +7.9 bp to 3.847%.
ECB Governing Council member Villeroy de Galhau said, "The ECB has cut interest rates twice and should continue to cut them," as victory over inflation is "within sight."
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 32% for the October 17 meeting.
US Stock Movers
Weakness in chip stocks weighed on the overall market. Intel closed down more than -3% to lead losers in the Dow Jones Industrials and the Nasdaq 100. Also, Nvidia , Advanced Micro Devices , Marvell Technology , Micron Technology , KLA Corp , Lam Research , Analog Devices , Applied Materials , and ON Semiconductor closed down more than-1%.
ResMed closed down more than -5% to lead losers in the S&P 500 after Wolfe Research downgraded the stock to underperform from peer perform with a price target of $180.
Sysco closed down more than -4% after CEO Hourican said restaurant traffic industrywide had softened a bit in the current quarter.
Cencora closed down more than -2% after Bank of America Global Research downgraded the stock to neutral from buy.
Incyte Corp closed down more than -1% after Truist Securities downgraded the stock to hold from buy.
Hilton Grand Vacations closed down nearly -1% after Goldman Sachs initiated coverage on the stock with a sell recommendation and a price target of $31.
General Motors closed up more than +2% as its customers with electric vehicles (EVs) now have access to 17,800 Tesla Superchargers starting this month, which may boost EV sales for GM as customer concerns ease about charging infrastructure with the expanded charger access.
PayPal Holdings rose more than +1% after announcing a new partnership with Amazon Buy with Prime.
VF Corp closed up more than +3% after Barclays upgraded the stock to overweight from equal weight with a price target of $22.
Victoria’s Secret & Co closed up more than +3% after Barclays upgraded the stock to equal weight from underweight.
GE Healthcare closed up nearly +2% after BTIG upgraded the stock to buy from neutral with a price target of $100.
United States Steel closed up more than +1% after a US security panel granted Nippon Steel permission to refile its plans to purchase the company for $14.1 billion.
Extra Space Storage closed up more than +1% after Jeffries upgraded the stock to buy from hold with a price target of $204.
Earnings Reports (9/19/2024)
Darden Restaurants Inc (DRI), FactSet Research Systems Inc (FDS), FedEx Corp (FDX), Lennar Corp (LEN).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policyhere.
Nvidia Corp is considering acquiring the OctoAI startup for $165 million to boost its software and cloud computing services.
According to the Information, which cites shareholders’ messages, the startup sells software designed to enhance the efficiency of artificial intelligence models.
OctoAI raised $132 million from investors, including Tiger Global, which was valued at $900 million in 2021.
In March, OctoAI tapped Nvidia to usher in optimized generative AI models for enterprises.
OctoAI integrated NVIDIA NIM (which refers to inference microservices for accelerating the deployment of foundation models on any cloud or data center) into its generative AI platform to serve customer use cases, including language and image generation. Additionally, developers could experiment with inference-optimized models.
Nvidia is up 163% in the last 12 months, as its Graphics Processing Units (GPUs) remain indispensable to Big Techs like Microsoft Corp , Amazon.Com Inc , Google parent Alphabet Inc’s dream of accomplishing its AI ambitions.
Nvidia chief Jensen Huang voiced his conviction in the AI frenzy, expecting hyper-scale customers to produce $5 in rental revenue for every $1 spent on Nvidia’s infrastructure.
Some significant hyper-scaler collaborations by Nvidia include Amazon and Oracle Corp , which BofA Securities analyst Justin Post expects will unlock significant cloud opportunities.
Price Action: NVDA stock is up 1.02% to $116.77 at the last check on Wednesday.
Image via Shutterstock
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Investors are on edge in the lead-up to the Wednesday Federal Open Market Committee interest rate decision that is expected to deliver the first cut to the federal funds rate in over four years.
The market is divided on the magnitude of the anticipated rate cut. Traders are assigning a 59% probability to a 50-basis-point cut, while a 41% chance is placed on a more modest 25-basis-point reduction. The size of the rate cut is crucial as it could trigger significant market reactions.
Should the Fed opt for a 50-basis-point cut, it may be perceived as an acknowledgment that interest rates are overly restrictive. This could lead to increased expectations for further rate cuts in the coming months, potentially fueling risk sentiment and driving stock prices higher.
Conversely, a 25-basis-point cut might disappoint investors who are betting on a more aggressive measure.
Since the start of 2022, the S&P 500, tracked by the SPDR S&P 500 ETF Trust , has experienced an average move of plus or minus 1.3% during FOMC events, reflecting the market’s high sensitivity to Fed policy decisions.
Goldman Sachs equity analysts, including John Marshall, analyzed stock movements during the first rate cuts in the previous three Fed easing cycles (Sept. 18, 2007, July 31, 2019 and March 3, 2020).
The data highlights the average moves of several key S&P 500 stocks with liquid options during these periods.
Read Next:
Federal Reserve illustration created using artificial intelligence via MidJourney.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Taiwan Semiconductor Manufacturing Company Ltd. TSM shares have surged 89.8% in the past year, outperforming the broader Zacks Computer and Technology sector’s 32.6% growth and the S&P 500’s 26.2% rally in the said time frame.
Such an impressive gain naturally leads investors to wonder whether Taiwan Semiconductor is still a compelling buy or if it is time to lock in profits.
The company has been benefiting from its scale and capacity, particularly for advanced technologies, which are constantly bolstering its footprint in the semiconductor manufacturing field.
One-Year Price Chart
Taiwan Semiconductor’s strength in wafer fabrication processes is the key catalyst. Its solid momentum among customers, increasing design wins, and strong presence in the domestic and international markets are major positives.
TSM Stock Rides on AI Boom
Taiwan Semiconductor’s strong positioning in the semiconductor industry, which is on the recovery path, owing to the growing proliferation of Artificial Intelligence (AI) and Generative AI, gives a strong hope that its robust advanced technologies will drive the stock further.
Semiconductors or chips — those necessary for AI developments — are in high demand from tech giants. The solid uptake of the Internet of Things (IoT), blockchain and cloud computing solutions is fueling demand for semiconductors.
Thanks to these favorable industry trends, Taiwan Semiconductor is experiencing solid demand for its advanced technologies, such as 3-nanometer (nm) and 5nm. Its strength in its other advanced technologies, such as 7nm, 16nm and 28nm, is another positive.
In the second quarter of 2024, 3nm, 5nm, 7nm, 16nm and 28nm accounted for 15%, 35%, 17%, 9% and 8% of the company’s wafer revenues, respectively.
Against this backdrop, TSM’s growing efforts to ramp up the production of 3nm are a plus. It is also making strides in the development of 2nm, which is capable of addressing the growing need for energy-efficient computing solutions and almost all AI innovators. This technology is designed to deliver a full node performance and power benefit, with 10-15% speed improvement at the same power, or 25-30% power improvement at the same speed, and more than 15% chip density increase.
Its expanding network of semiconductor facilities, which currently includes one 150mm wafer fab, six 200mm wafer fabs, six 300mm wafer fabs and five advanced backend fabs, bodes well for its production ramp goals.
Taiwan Semiconductor is constantly witnessing strong momentum across high-performance computing, smartphone, automotive, IoT and digital consumer electronics applications on the back of robust Fin Field-Effect Transistor (FinFET), which is powered by its advanced technologies. In the June-end quarter, these applications contributed 52%, 33%, 6%, 5% and 2% to the net revenues, respectively.
The growing adoption of the company’s multi-project wafer processing service, which allows customers to reduce mask costs, is driving its customer momentum further.
Solid Customer Momentum Drives TSM’s Growth
Taiwan Semiconductor enjoys a strong customer momentum on the back of its powerful solutions.
The company’s customer base includes many semiconductor bigwigs, such as NVIDIA NVDA, Advanced Micro Devices, Amazon Web Services, Broadcom AVGO, Infineon Technologies, Intel INTC, MediaTek, NXP Semiconductors, Qualcomm and Sony.
In 2023, the company’s 10 large customers contributed 70% to the total revenues. The largest customer among them contributed 25% alone, whereas the second-largest customer accounted for 11% of the net revenues in the same year.
Growing relationships with these behemoths are expected to continue driving top-line growth.
TSM’s Strong Outlook
For third-quarter 2024, Taiwan Semiconductor expects the solid adoption of AI and smartphones to boost the demand for its leading-edge process technologies. It projects revenues between $22.4 billion and $23.2 billion.
The company also expects above 20% growth in 2024 revenues due to rising demand for high-end chips used in AI applications.
The Zacks Consensus Estimate for third-quarter 2024 revenues is pegged at $22.72 billion, indicating year-over-year growth of 31.5%.
The consensus mark for third-quarter 2024 earnings is pegged at $1.74 per share, suggesting year-over-year growth of 34.9%. The estimate has been revised upward by 1.2% in the past 30 days.
The Zacks Consensus Estimate for 2024 revenues is pegged at $85.62 billion, indicating year-over-year growth of 23.6%.
The consensus mark for 2024 earnings is pegged at $6.45 per share, indicating year-over-year growth of 24.5%. The estimate has been revised upward by 2.2% in the past 60 days.
TSM Offers Attractive Valuation
TSM stock is currently trading at a discount with a forward 12-month P/E multiple of 21.57X, lower than the sector’s average of 25.94X. This reflects a good entry point for the investors.
Conclusion
Investors considering Taiwan Semiconductor should weigh its robust technological foundation and strong positioning in the promising semiconductor industry. Its solid customer momentum and strong network of semiconductor fabs present a lucrative opportunity for investors to add the TSM stock to their portfolio.
Taiwan Semiconductor currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks Investment Research
Cadence Design Systems CDNS stock has declined 15.8% in the past three months, underperforming its industry and the broader technology sector. Within the same time frame, the sub-industry and the Zacks Computer and Technology sector have declined 2.5% and 4.3%, respectively. It also lags the S&P 500’s growth of 2.4%.
Three-Month Price Performance
CDNS shares have been declining as the company’s guidance for the current quarter revenues and earnings per share came in lower than anticipated despite positive business trends. The guidance is largely affected by the timing of Verification revenues and headwinds associated with China revenues.
This considerable decline in stock price has caught the attention of investors, prompting questions about whether to maintain their positions or cut their losses.
What Ails CDNS Stock?
The transition to next-generation Verification systems will weigh on the near-term revenues from the Functional Verification segment. CDNS launched new Verification hardware systems in April 2024. As a result, upfront revenues are expected to be skewed toward the second half of 2024 as the company works to build inventory of new systems.
Management noted that the ‘shape of the revenue curve’ is driving the guidance. It does not expect massive revenue growth in the Verification business in 2024 but it will be an improved performance over 2023. Verification revenues are likely to pick up pace in 2025 once the company completes building inventory of its new systems.
Moreover, CDNS cut the full-year EPS outlook, owing to the dilutive impact of 12 cents of the BETA CAE acquisition. Non-GAAP earnings per share for the full year are expected to be between $5.77 and $5.97 compared with the previous guidance of $5.88 and $5.98.
Uncertainty prevailing over global macroeconomic conditions and substantial exposure to the semiconductor vertical is concerning. Any reduction in R&D spending for companies within the semiconductor sector could affect CDNS' performance.
Higher operating costs and stiff competition in the EDA space from the likes of Keysight Technologies KEYS, Synopsys SNPS and ANSYS ANSS are additional headwinds. The pending acquisition of ANSYS by Synopsys is likely to amp up competition in the EDA space for all players.
CDNS' Premium Valuation & Bearish Technical Indicators
Cadence’s stock is trading at a premium with a forward 12-month Price/Earnings of 41.59X compared with the industry’s 32.56X. Though the lofty valuation reflects high expectations for future growth, the near-term prospects of the company remain somewhat muddled.
CDNS’ technical indicators suggest that further downside could be ahead. The stock has been trading below both the 100-day and 200-day moving averages, indicating that investors may be losing confidence in the stock. High valuation and bearish technical indicators suggest that CDNS stock may face more volatility, at least in the near term.
Estimates are Southbound for CDNS
Analysts are bearish about the stock, which is evident from the downward revision in earnings estimates.
In the past 60 days, analysts have decreased their earnings estimates for the current quarter and current year by 11.1% and 1% to $1.44 and $5.87 per share, respectively. The estimate for the next year has also been revised downward by 1.2% to $6.90.
Cadence’s Long-Term Prospects Encouraging
Strengthening demand trends for differentiated solutions, solid bookings and healthy backlog are key growth catalysts for CDNS. Cadence noted that its latest hardware (Palladium Z3 Emulation and Protium X3 FPGA Prototyping systems) solutions are likely to witness solid demand, especially by AI, hyperscale and automotive companies.
The Z3 and X3 platforms offer more than double the capacity and a significant performance increase from the prior generation. Leading tech firms like NVIDIA, ARM and AMD have also endorsed these systems.
CDNS’ Inorganic Growth Strategy on Point
Acquisitions have played a pivotal role in driving topline expansion for CDNS. Last year, CDNS acquired Intrinsix Corporation and SerDes and memory interface PHY IP business from Rambus. In 2022, the company acquired four companies: OpenEye Scientific Software, Future Facilities, Pointwise and NUMECA.
In June 2024, Cadence completed the acquisition of Switzerland-based BETA CAE, a leading provider of engineering simulation solutions. The acquisition will enhance Cadence's Intelligent System Design strategy by broadening its multiphysics system analysis offerings and helping it enter into the structural analysis sector. In January 2024, the company purchased California-based embedded software and system-level solutions provider Invecas, Inc.
Revenues for 2024 are now projected to be in the range of $4.6-$4.66 billion compared with the previous guidance of $4.56-$4.62 billion. It includes $40 million in revenues (at the midpoint) from the acquisition of BETA CAE.
Accelerating Design Activity Bodes Well for CDNS
Design activity continues to be solid, owing to transformative generational trends such as hyperscale computing, 5G and autonomous driving, bolstered by the proliferation of AI. CDNS solutions are also witnessing strong adoption as system companies build their silicon amid increasing chip complexity.
Customers have been significantly increasing their R&D budgets in AI-driven automation. This bodes well for the Cadence.AI portfolio. CDNS remains focused on embedding cutting-edge AI capabilities across its SDA, EDA and digital biology offerings.
Should CDNS Stock be in Your Portfolio?
Strong end-market demand and opportunities presented by the rapid proliferation of AI applications are positives for Cadence but the external risks warrant caution in the near term. The company’s falling estimates and expensive valuation are concerning.
Consequently, it might not be a prudent investment decision to bet on the stock, which carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, stakeholders and investors already owning the stock could stay put as long-term prospects for CDNS appear promising amid increasing design activity in the semiconductor space.
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