Tuesday, on the eve of FormFactor 's (NASDAQ:FORM) first-quarter earnings report, Stifel has increased the company's price target to $42 from $36, while maintaining a Hold rating on the shares. The adjustment comes in anticipation of the semiconductor company's earnings, which are expected to be at the higher end of the provided guidance range.
The analyst from Stifel highlighted that the general conditions in the semiconductor demand environment have remained stable, albeit without acceleration. However, an exception has been noted in the DRAM sector, where there has been a significant increase in revenue, particularly with a 50% sequential growth in HBM-related revenue as projected in FormFactor's first-quarter outlook.
Looking ahead, the focus for FormFactor will be on whether foundry-logic sales can establish an upward trend in a subdued unit environment, and if the stronger memory ATE spending could confirm or perhaps deem the analyst's expected HBM sales outlook — which predicts a doubling year-over-year — as conservative. Additionally, the company will need to consider any potential constraints as memory revenue approaches record run rates.
The revised price target of $42 reflects a multiple of 24 times Stifel's estimated earnings per share for the calendar year 2025. This new target is set in light of the robust activity observed in the HBM and DRAM segments, which has been a clear standout in FormFactor's performance. The company is scheduled to report its first-quarter earnings after the market closes on Wednesday.
InvestingPro Insights
As FormFactor (NASDAQ:FORM) gears up to release its first-quarter earnings, the investment community is closely monitoring the company's financial health and market performance. According to InvestingPro data, FormFactor has a market capitalization of $3.53 billion and a P/E ratio of 42.72, indicating a significant valuation based on earnings. Notably, the company's stock has experienced a significant return over the last week, with a 9.95% increase in total price return, which aligns with the positive sentiment leading up to the earnings report.
An InvestingPro Tip to consider is that FormFactor is trading at a high earnings multiple, with an adjusted P/E ratio for the last twelve months as of Q4 2023 standing at 168.64. This could suggest investor confidence in the company's future growth prospects, especially in the context of the semiconductor industry's cyclical nature. Additionally, with a strong return over the last year of 66.72%, FormFactor has outperformed many peers in the sector, further underscoring its robust market position.
Investors may also find value in the fact that FormFactor holds more cash than debt on its balance sheet, which could provide the company with financial flexibility to navigate the dynamic semiconductor landscape. The company's liquidity position is a critical factor, especially when considering potential investments in research and development or capital expenditures to maintain competitiveness.
For those looking to delve deeper into FormFactor's financials and market performance, InvestingPro offers a comprehensive suite of additional tips. Currently, there are 17 more InvestingPro Tips available for FormFactor that can help investors make more informed decisions. To explore these insights and benefit from the full range of analysis, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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