Teradyne upgraded by Morgan Stanley on Nvidia optimism

Investing.com -- Shares of Teradyne Inc (NASDAQ: TER) were upgraded by Morgan Stanley to equal weight from underweight, saying stronger-than-expected commentary on opportunities with Nvidia (NASDAQ: NVDA) had bolstered investor sentiment.

The brokerage anticipated that Teradyne’s quarterly results would be overshadowed by earnings pressure, but said market reaction suggests investors are giving more credit to the company’s potential role in Nvidia’s growing compute supply chain.

While second-quarter revenue and earnings were broadly in line with expectations, the stock rose as much as 18% after executives highlighted Teradyne’s expanded opportunity in GPU testing, describing a “level playing field” with rival Advantest and a shift toward a dual-supplier model by Nvidia.

Morgan Stanley, which had previously expressed skepticism over Teradyne’s ability to gain share beyond switches and Mellanox (NASDAQ: MLNX) products, acknowledged that the upbeat tone from management may delay estimate cuts and support the stock near term.

Still, the brokerage maintained a cautious view on the longer-term upside, noting that Advantest continues to dominate the GPU testing market, and said it would need further evidence of meaningful share gains by Teradyne to become more bullish.

Morgan Stanley raised its price target on the stock to $100 from $74.


“We thought cuts would outweigh commentary, but the commentary on compute opportunity was more bullish than expected. We take a conservative stance but the optionality should support shares near term,” analysts at Morgan Stanley said.

Teradyne forecast third-quarter revenue of $740 million at the midpoint, ahead of consensus, but guided margins and earnings per share slightly below analysts’ estimates.

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