Summary
- Teradyne is a "slow but steady" growth company with revenue growing at mid-single digits.
- Its industrial automation revenue is expected to grow at a CAGR of 30-40% over the long term.
- Investors should patiently wait for pullbacks to buy the stock.
Teradyne (TER) is trading at an attractive valuation compared to its peers. However, it is a slow growth company. Compared to the current price, its 2022 price has 22.5% upside left, which is not very significant. But Teradyne is a steady and compelling long-term growth story. If investors want to make money from this company, they should wait for meaningful pullbacks for buying the stock.
Teradyne designs and develops automatic test systems for testing semiconductors, wireless products, data storage systems, and complex electronics systems. These systems are used in various sectors, such as consumer electronics, industrial, computing, automotive, telecom, aerospace, and defense. The company also develops industrial automation products, such as collaborative robotic arms, autonomous mobile robots, and advanced robotic control software.
Teradyne: Growth Drivers
For testing semiconductors, Teradyne designs and develops semiconductor test products and services on a worldwide basis. This is a medium-growth business with proliferation of electronics devices and disruptive ideas such as 5G and autonomous driving. The company's Flex test platform architecture along with IG-XL software operating system help it producing test equipment designed for high efficiency multi-site testing, which involves parallel testing of many devices in tandem. The IG-XL operating system offers instant conversion from single-site to multi-site test. The company's multi-site testing option reduces the cost of semiconductor manufacturers, which results in increased demand for Teradyne's semiconductor test products.
Teradyne's J750 platform, which runs on the IG-XL operating system, is the industry standard for cost-effective test of a broad set of diverse chips. These chips include microcontrollers, FPGAs, and chips for digital audio/baseband devices. Teradyne has continued to invest in the J750 platform to bring new capabilities to the platform. For example, the company's IP750 Image Sensor test system, which tests image sensor devices used in smartphones and other imaging products, is an extended version of the J750 platform. The J750 platform is a solid growth driver for the company as far as developing new products are concerned.
For testing flash memory and DRAM, Teradyne's Magnum platform delivers high throughput and highly parallel test capabilities. Global memory chip market is expected to grow at a CAGR of 12.4% from 2017 to 2023, according to a research report. As a result, the Magnum platform will see robust demand during this time frame. In addition, the company is bringing to the market next generation memory test solutions, such as Magnum V, which is also acting as a growth driver for the company's memory test solutions.
