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On Monday, Cantor Fitzgerald analysts revised their stance on Onto Innovation Inc. (NYSE:ONTO), downgrading the stock from Overweight to Neutral and significantly reducing the price target to $135 from $250. The adjustment comes amid concerns regarding increasing competition and potential risks to the company’s second-half financial projections. The stock has experienced significant pressure, falling nearly 27% over the past six months, though InvestingPro data shows the company maintains strong financial health with a current ratio of 8.69 and minimal debt-to-equity of 0.01.
Matthew Prisco of Cantor Fitzgerald expressed caution regarding ONTO’s upcoming financial report, indicating that the numbers might require some adjustment due to competitive pressures. Although the fundamental market conditions for ONTO have not drastically changed in the past three months, there is a sense that the company’s forecasts could be optimistic given the current landscape. According to InvestingPro analysis, the company has maintained impressive revenue growth of 21% over the last twelve months, with 12 additional key insights available to subscribers through the comprehensive Pro Research Report.
In his analysis, Prisco highlighted several key areas that investors should pay attention to, including any changes to the High Bandwidth (NASDAQ:BAND) Memory (HBM) revenue outlook, which is currently expected to decline by 30-40% year-over-year. Other focal points include updates on the competitive environment within Chip on Wafer on Substrate (CoWoS), new product developments, and the trajectory for Advanced Nodes in the calendar year 2025.
The analyst also suggested that there might be a modest downside risk to Onto Innovation’s earnings in the latter half of the year. This is partly due to uncertainties around tariffs and other market factors that could impact the company’s performance. As a result, earnings projections for calendar years 2025 and 2026 might be revised down to approximately $6.00 and $7.10 per share, respectively, compared to the consensus estimates of $6.19 and $7.39 per share. The company currently trades at a P/E ratio of 31.2 and an EV/EBITDA multiple of 21.5, with InvestingPro’s Fair Value analysis suggesting the stock is fairly valued at current levels.
The new price target reflects a more conservative outlook on ONTO’s earnings power following the anticipated financial update. Investors are advised to monitor the company’s forthcoming financial statements for insights into these discussed areas and potential adjustments to future earnings expectations.
In other recent news, Onto Innovation Inc. reported its fourth-quarter 2024 earnings, surpassing expectations with an earnings per share (EPS) of $1.51 against the forecast of $1.41, and revenue of $264 million, exceeding the projected $259.29 million. Despite these results, the company’s stock experienced a decline in after-hours trading. Onto Innovation is projecting revenue between $260 million and $274 million for the first quarter of 2025, with a gross margin forecast of 54% to 56%. Additionally, Stifel analysts adjusted their price target for Onto Innovation to $200 from $250, while maintaining a Buy rating, citing challenges in the advanced packaging and specialty business despite positive momentum in the advanced nodes sector. Meanwhile, Cantor Fitzgerald reaffirmed an Overweight rating with a $250 price target, highlighting the company’s potential growth driven by artificial intelligence infrastructure. Separately, Onto Innovation announced the resignation of Dr. Srinivas Vedula, Senior Vice President of Customer Success, effective April 8, 2025, stating the departure was not due to any disagreements with the company’s operations. These developments reflect the dynamic landscape Onto Innovation is navigating as it continues to leverage growth opportunities.
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