Teradyne
TER
$343.21
-4.52%
Teradyne, Inc. is a leading supplier of automated test equipment (ATE) for semiconductors and electronics, alongside a growing robotics and industrial automation business, operating within the semiconductor capital equipment industry. The company holds a dominant position in semiconductor test, particularly for complex AI and memory chips, serving vertically integrated, fabless, and foundry chipmakers globally. The current investor narrative is intensely focused on Teradyne's role as a critical enabler of the AI computing buildout, with recent headlines highlighting surging memory chip demand and the Tesla Terafab project as catalysts. However, the stock has also been volatile, with debates around near-term margin pressure, revenue lumpiness, and whether the AI-driven rally has become overextended, as evidenced by recent analyst downgrades and high-profile short bets on the sector.…
TER
Teradyne
$343.21
Related headlines
Investment Opinion: Should I buy TER Today?
We assign a Hold rating with a bullish bias. The core thesis is that Teradyne is a high-quality, AI-driven growth story with exceptional fundamentals, but its current valuation (forward PE 34.56x) already prices in much of the near-term optimism, limiting upside to the analyst average target of $446.47 (+10.9%). The consensus recommendation is Buy (mean 1.71), but the recent downgrade by Baird and the wide target range ($350-$550) suggest caution is warranted.
The supporting evidence is strong: revenue grew 103.9% YoY in Q2 2026, operating margin expanded to 32.9%, and free cash flow TTM is $799.9 million. The balance sheet is pristine with debt-to-equity of 0.124 and ROE of 19.8%. However, the stock trades at a premium to the semiconductor industry average PE of 25-30x, and its PS ratio of 9.49x is elevated. The implied upside to the average analyst target is only 10.9%, which is modest relative to the risk (beta 1.747, max drawdown -33.98%).
The biggest risks that could invalidate the thesis are a slowdown in AI capex, margin compression, and competitive pressures. The rating would upgrade to Buy if the stock pulls back to the $350-$360 support zone (forward PE ~30x) or if revenue growth accelerates beyond 100% with margin expansion. It would downgrade to Sell if revenue growth decelerates below 50% YoY or if operating margins fall below 25%. Relative to its history (PE range 17x-67x) and peers, the stock is fairly valued to slightly overvalued, but the growth trajectory justifies a premium if sustained.
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TER 12-Month Price Forecast
Teradyne presents a compelling growth story with exceptional fundamentals, but the stock's premium valuation and high beta (1.747) introduce significant risk. The AI-driven demand for semiconductor test equipment is a powerful tailwind, yet the cyclical nature of the industry and recent guidance for margin pressure warrant caution. The analyst consensus is bullish, but the modest upside to the average target and the recent downgrade by Baird suggest that much of the good news is priced in. We would upgrade to bullish if the stock pulls back to the $350-$360 support zone or if revenue growth accelerates beyond 100% with margin expansion. Conversely, a downgrade to bearish would be triggered by a deceleration in revenue growth below 50% YoY or a significant margin contraction.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Teradyne's 12-month outlook, with a consensus price target around $446.47 and implied upside of +30.1% versus the current price.
Average Target
$446.47
0 analysts
Implied Upside
+30.1%
vs. current price
Analyst Count
—
covering this stock
Price Range
$350 - $550
Analyst target range
Teradyne is covered by 15 analysts, with a consensus recommendation of "Buy" (mean rating of 1.71 on a scale where 1 is Strong Buy and 5 is Strong Sell). The average target price is $446.47, which implies an upside of approximately +10.9% from the current price of $402.68. The consensus leans bullish, with the majority of analysts maintaining positive ratings, though recent actions show some caution: Baird downgraded the stock to Neutral from Outperform on August 21, 2026, while most other firms reiterated Buy or Overweight ratings. The target price range spans from a low of $350 to a high of $550. The high target of $550 assumes continued acceleration in AI-driven demand, successful execution on margin expansion, and multiple expansion, potentially driven by new product cycles or market share gains. The low target of $350, which is about 13% below the current price, likely prices in a cyclical downturn, margin compression, or a broader semiconductor slowdown. The wide spread of $200 (50% of the average target) signals high uncertainty and divergent views on the sustainability of the current growth trajectory. Institutional ratings show a mix of reiterations and one downgrade, indicating that while the long-term story remains intact, near-term risks are being acknowledged.
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Bulls vs Bears: TER Investment Factors
The bull case for Teradyne is compelling, anchored by explosive revenue growth (+103.9% YoY), expanding margins (operating margin 32.9%), and a pristine balance sheet (debt-to-equity 0.124). The AI-driven demand for semiconductor test equipment shows no signs of abating, and analyst consensus remains bullish with a $446.47 average target. However, the bear case is equally credible: the stock trades at a significant premium (forward PE 34.56x vs. industry 25-30x), and its high beta (1.747) and recent -33.98% max drawdown highlight the risks of a momentum reversal. The single most important tension is whether the AI capex cycle can sustain the current growth rate—if it does, the premium valuation is justified; if it slows, the stock could face a sharp correction. Currently, the bull evidence (growth, margins, balance sheet) outweighs the bear concerns, but the valuation and cyclicality warrant caution.
Bullish
- Explosive Revenue Growth: Q2 2026 revenue surged 103.9% YoY to $1.329 billion, following 87% YoY growth in Q1 2026 and 44% in Q4 2025. This acceleration is driven by surging demand for AI and memory chip testing equipment, positioning Teradyne at the heart of the AI infrastructure buildout.
- Margin Expansion and Operating Leverage: Operating margin expanded to 32.9% in Q2 2026 from 13.9% a year earlier, while net margin jumped to 28.2% from 12.0%. Gross margin remained stable at 59.8%, indicating pricing power and efficient scaling.
- Fortress Balance Sheet: Debt-to-equity is a mere 0.124 and the current ratio is 1.76, providing ample liquidity. Free cash flow TTM is $799.9 million, with $378.4 million generated in Q2 2026 alone, funding growth, dividends, and buybacks.
- Strong Analyst Consensus and Upside: 15 analysts rate the stock a Buy (mean 1.71), with an average target price of $446.47, implying 10.9% upside from $402.68. The high target of $550 suggests 36.6% upside if AI-driven demand accelerates further.
Bearish
- Elevated Valuation Leaves Little Room for Error: Trailing PE is 55.46x and forward PE is 34.56x, both at a premium to the semiconductor industry average of 25-30x. The PS ratio of 9.49x and EV/EBITDA of 37.35x are also stretched, pricing in flawless execution.
- High Volatility and Drawdown Risk: Beta of 1.747 means the stock is 74.7% more volatile than the market, and the maximum drawdown over the past year was -33.98%. Such swings can lead to significant losses for momentum-chasing investors.
- Revenue Lumpiness and Margin Pressure: Recent guidance signaled near-term margin pressure and revenue lumpiness, causing a sharp sell-off on April 29, 2026. The semiconductor equipment business is inherently cyclical, and any slowdown in AI capex could reverse growth rapidly.
- Analyst Caution and High Uncertainty: Baird downgraded the stock to Neutral on August 21, 2026, and the target price range spans $350 to $550—a $200 spread (50% of the average target). This wide dispersion reflects divergent views on the sustainability of the current growth trajectory.
TER Technical Analysis
Teradyne is in a powerful, sustained uptrend, with a 1-year price change of +177.35%, massively outperforming the S&P 500's +16.0% over the same period. The current price of $402.68 sits at approximately 76% of its 52-week range (low of $131.75, high of $487.91), indicating strong momentum but also room to run before challenging its high. This positioning suggests the stock is in a bullish phase, though not yet at extreme overbought levels relative to its yearly range. Recent momentum remains positive but has decelerated: the 1-month change is +4.95% and the 3-month change is +11.98%, both significantly lower than the 1-year gain, signaling a consolidation phase after a massive run. The 1-month relative strength versus SPY is +2.83%, showing continued outperformance, but the 6-month relative strength is -5.16%, indicating a period of underperformance earlier in the year. This divergence suggests the stock is recovering from a mid-year pullback, with the 1-month trend confirming a re-acceleration. Key technical levels are defined by the 52-week low at $131.75 (major support) and the 52-week high at $487.91 (resistance). A breakout above $487.91 would signal a resumption of the primary uptrend and likely attract momentum buyers, while a breakdown below the $350-$360 area (recent consolidation zone) could lead to a test of the $300 support level. With a beta of 1.747, the stock is 74.7% more volatile than the market, implying that position sizing should be conservative and that price swings can be amplified; the maximum drawdown of -33.98% over the past year underscores this risk.
Beta
1.75
1.75x market volatility
Max Drawdown
-34.0%
Largest decline past year
52-Week Range
$136-$488
Price range past year
Annual Return
+143.4%
Cumulative gain past year
| Period | TER Return | S&P 500 |
|---|---|---|
| 1m | +3.1% | +1.9% |
| 3m | +6.5% | +3.8% |
| 6m | -9.8% | +8.7% |
| 1y | +143.4% | +16.0% |
| ytd | +65.4% | +13.2% |
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TER Fundamental Analysis
Teradyne's revenue trajectory is showing a sharp acceleration. The most recent quarter (Q2 2026, ended June 28) reported revenue of $1.329 billion, a 103.9% year-over-year increase from $651.8 million in Q2 2025. This follows Q1 2026 revenue of $1.282 billion (up 87% YoY from $685.7 million) and Q4 2025 revenue of $1.083 billion (up 44% YoY from $752.9 million). The multi-quarter trend is clearly accelerating, driven by surging demand for semiconductor test equipment, particularly for memory and AI chips, with product revenue of $1.191 billion and service revenue of $137.7 million in the latest quarter. This growth implies a robust investment case tied to the AI infrastructure buildout. Profitability is strong and expanding. In Q2 2026, net income was $374.5 million, with a net margin of 28.2%, up from 12.0% in Q2 2025. Gross margin was 59.8% in Q2 2026, relatively stable compared to 57.2% in Q2 2025, but operating margin surged to 32.9% from 13.9% a year earlier, reflecting operating leverage. The company is solidly profitable, and margins are at the high end of its historical range, typical for a semiconductor equipment leader during an upcycle. The balance sheet is exceptionally healthy. Debt-to-equity is only 0.124, and the current ratio is 1.76, indicating ample liquidity. Free cash flow (TTM) is $799.9 million, and in Q2 2026 alone, operating cash flow was $469.1 million with free cash flow of $378.4 million. Return on equity (ROE) is 19.8%, and return on assets (ROA) is 19.7%, demonstrating efficient capital use. The company generates more than enough cash to fund growth internally, with capital expenditures of $90.7 million in Q2 2026, while also returning cash to shareholders via dividends ($20.3 million) and buybacks ($68.7 million).
Quarterly Revenue
$1.3B
2026-06
Revenue YoY Growth
+103.9%
YoY Comparison
Gross Margin
59.8%
Latest Quarter
Free Cash Flow
$799932000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is TER Overvalued?
Because Teradyne is profitable (net income of $374.5 million in Q2 2026), the PE ratio is the primary valuation metric. The trailing PE is 55.46x, while the forward PE is 34.56x, implying the market expects significant earnings growth (forward EPS of $15.46 vs. trailing EPS of $0.0183, though the trailing EPS figure appears distorted by one-time items; using quarterly EPS of $2.39, the annualized run-rate PE is closer to 42x). The large gap between trailing and forward PE suggests the market is pricing in robust earnings expansion over the next year. Compared to the semiconductor industry average PE of approximately 25-30x, Teradyne trades at a premium. Its forward PE of 34.56x is about 15-38% above the sector average, justified by its superior growth (revenue +104% YoY) and dominant position in AI chip testing. However, the PS ratio of 9.49x and EV/EBITDA of 37.35x are also elevated, reflecting high expectations. Historically, Teradyne's PE ratio has ranged from 17x to 67x over the past five years, with a median around 30x. The current trailing PE of 55.46x is near the upper end of its historical band, while the forward PE of 34.56x is closer to the median. This suggests that while the stock is not cheap, the forward valuation is more reasonable if earnings growth materializes. The PB ratio of 10.83x is also high relative to its history (range 4.8x to 21x), indicating the market is pricing in optimistic growth and profitability.
PE
55.5x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 17x~49x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
37.3x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are moderate but manageable. The company carries minimal debt (debt-to-equity 0.124) and has a strong current ratio of 1.76, but its revenue is highly concentrated in semiconductor test equipment, which is inherently cyclical. A downturn in chip demand could lead to revenue lumpiness and margin compression, as evidenced by the April 2026 guidance that signaled near-term margin pressure. Additionally, the trailing PE of 55.46x and forward PE of 34.56x leave little room for earnings misses; any slowdown in growth could trigger a sharp de-rating. Free cash flow is robust at $799.9 million TTM, but capital expenditures ($90.7 million in Q2 2026) and shareholder returns ($20.3 million dividends, $68.7 million buybacks) must be sustained to support valuation.
Market and competitive risks are significant. The stock's beta of 1.747 makes it highly sensitive to market swings, and its premium valuation (PS 9.49x, EV/EBITDA 37.35x) is vulnerable to multiple compression if interest rates remain elevated or if sector rotation occurs. Competition in the ATE market is intense, and any loss of market share to rivals like Advantest could hurt growth. Recent news highlights Michael Burry's short bet on semiconductors, reflecting sentiment risk, and Baird's downgrade to Neutral underscores near-term caution. Regulatory risks, such as export controls on chip equipment, could also disrupt sales.
The worst-case scenario involves a sharp cyclical downturn in semiconductor demand, exacerbated by a broader market correction. In this scenario, revenue could decline, margins would compress, and the stock could retest its 52-week low of $131.75—a 67% drop from the current price of $402.68. Even a moderate pullback to the analyst low target of $350 would represent a 13% loss. Given the stock's high beta and historical max drawdown of -33.98%, investors could lose over a third of their capital in a severe downturn. The key trigger would be a slowdown in AI capex or a significant earnings miss that forces analysts to revise estimates downward.
FAQ
The key risks include: 1) Cyclical downturn in semiconductor demand, which could cause revenue lumpiness and margin compression, as hinted by April 2026 guidance; 2) Valuation risk, with the stock trading at a premium (forward PE 34.56x) that leaves little room for error; 3) Competitive pressures from rivals like Advantest, potentially eroding market share; and 4) Macro sensitivity, with a beta of 1.747 making the stock highly volatile and vulnerable to market corrections. Additionally, regulatory risks such as export controls could disrupt sales. The most severe risk is a sharp AI capex slowdown, which could trigger a 30-50% drawdown.
Our 12-month forecast for Teradyne includes three scenarios: Bull case (30% probability) targets $500-$550, driven by continued AI demand acceleration and margin expansion; Base case (50% probability) targets $430-$470, assuming steady execution with moderating growth; Bear case (20% probability) targets $300-$350, reflecting a cyclical downturn or AI capex slowdown. The base case is most likely, supported by the analyst average target of $446.47. The key assumption is that revenue growth remains above 50% YoY and operating margins hold above 30%. A breakout above $487.91 would confirm the bull case, while a break below $350 would signal the bear case.
Teradyne appears fairly valued to slightly overvalued relative to its peers and history. The trailing PE of 55.46x is near the upper end of its 5-year range (17x-67x), while the forward PE of 34.56x is above the semiconductor industry average of 25-30x. The PS ratio of 9.49x and EV/EBITDA of 37.35x are also elevated. However, the premium is justified by superior growth (revenue +103.9% YoY) and dominant positioning in AI chip testing. The market is pricing in continued robust earnings expansion, as evidenced by the forward EPS estimate of $15.46. If growth decelerates, the multiple could compress, leading to a price correction.
Teradyne is a good buy for growth-oriented investors with a high risk tolerance, but the current valuation offers limited margin of safety. The stock trades at a forward PE of 34.56x, a premium to the industry average of 25-30x, and the average analyst target of $446.47 implies only 10.9% upside. The company's revenue growth of 103.9% YoY and operating margin of 32.9% are impressive, but the high beta (1.747) and recent max drawdown of -33.98% mean significant volatility. A pullback to the $350-$360 support zone would provide a more attractive entry point. For long-term investors, the AI-driven demand for semiconductor test equipment is a powerful tailwind, but position sizing should be conservative.
Teradyne is suitable for both, but with different risk profiles. For long-term investors (3-5 years), the AI-driven demand for semiconductor test equipment provides a structural growth tailwind, and the company's strong balance sheet (debt-to-equity 0.124) and cash flow generation ($799.9M FCF TTM) support a buy-and-hold strategy. However, the high beta (1.747) and cyclicality mean short-term trading can be lucrative but risky. Given the current premium valuation and recent consolidation, a minimum holding period of 2-3 years is recommended to ride out volatility. Short-term traders should watch the $350-$360 support and $487.91 resistance levels for entry and exit points.
