Teradyne Declines 11% Year to Date: Buy, Sell or Hold the Stock?

Core Viewpoint - Teradyne's share price has declined 10.5% year to date, underperforming both the Zacks Computer & Technology sector and the Zacks Electronics - Miscellaneous Products industry [1] Financial Performance - Teradyne reported fourth-quarter 2024 revenues of $753 million, a 12.2% year-over-year increase, surpassing the Zacks Consensus Estimate by 1.65% [3] - Earnings for the same quarter were 95 cents per share, exceeding the consensus mark by 5.56% and reflecting a 20.3% year-over-year growth [3] - The Zacks Consensus Estimate for first-quarter 2025 earnings is 61 cents per share, indicating a 19.61% growth compared to the previous year [4] Market Outlook - The company expects first-quarter 2025 sales to be between$ 660 million and $700 million, indicating a sequential decline [2] - Teradyne's SOC and memory test revenues increased by 17% year over year in 2024, driven by strong demand for AI accelerator ASICs and High Bandwidth Memory [8] - The SOC Total Addressable Market is projected to grow approximately 7% year over year in 2025, supported by demand for AI Compute and recovery in various sectors [9] Business Segments - The Semiconductor Test outlook remains strong, while the Robotics forecast is seasonally soft due to a challenging industrial spending environment [2] - Teradyne's System and Wireless Test businesses experienced a combined revenue decline of 4% year over year in 2024, but the Wireless Test business is expected to return to growth in 2025 [13] - The company is restructuring its Robotics division to improve efficiency, with breakeven revenues expected to decline from$ 440 million in 2024 to $365 million in 2025 [14][15] Valuation and Stock Performance - Teradyne shares are currently trading at a forward 12-month P/E of 27.81X, compared to the broader sector's 26.88X, indicating a premium valuation [16] - The stock is trading below both the 50-day and 200-day moving averages, suggesting a bearish trend [19] Investment Considerations - Despite the robust and diversified portfolio, weaknesses in the Robotics and System/Wireless businesses, along with a stretched valuation, present risks for investors [21] - Teradyne currently holds a Zacks Rank 3 (Hold), suggesting that investors should wait for better entry points [22]