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On Friday, TD Cowen analyst Krish Sankar adjusted the price target on Ichor Holdings (NASDAQ:ICHR) to $38.00, a decrease from the previous $40.00, while maintaining a Buy rating on the stock. Currently trading at $31.38, the stock sits between analyst targets ranging from $35 to $50, according to InvestingPro data. The company's stock has shown significant volatility with a beta of 1.93, making it more sensitive to market movements than average.
The revision follows Ichor's preliminary fourth quarter 2024 results and its outlook for March 2025. Despite near-term gross margin pressures due to inventory charges, higher labor costs, and an unfavorable product mix, the company reported better-than-expected revenues. InvestingPro data reveals a concerning gross profit margin of 11.66%, supporting the analyst's concerns. While the company maintains a strong liquidity position with a current ratio of 3.64, InvestingPro's Financial Health Score indicates a "FAIR" overall rating. These were attributed to an improving outlook for deposition and etching related tools.
Ichor's preliminary December 2024 quarter results indicated an offset to earnings per share contributions from a higher revenue line, as increased visibility on NAND market demand emerged as a positive factor. This outlook aligns with TD Cowen's calendar year 2025 NAND Wafer Fabrication Equipment (WFE) view, which anticipates a 24% year-over-year increase. However, the firm has adopted a more conservative stance on Ichor's revenue progression for the year and now forecasts a 9% year-over-year growth for calendar year 2025, revised down from the previously expected 15%.
The analyst's valuation of Ichor is based on a price-to-earnings (P/E) approach. By applying a 29x multiple—up from the prior 27x—to the estimated calendar year 2025 earnings per share of $1.30, the new $38.00 price target was established. This adjustment reflects a tempered but still optimistic view on the company's performance, as Ichor is expected to outgrow the overall WFE market later in the year.
The report suggests that while Ichor is well-positioned to capitalize on the recovery in the WFE sector, current gross margin pressures are significant enough to warrant a cautious revenue outlook. Nevertheless, the maintained Buy rating indicates a continued positive long-term perspective on Ichor's market position and financial health.
Based on current metrics, InvestingPro's Fair Value analysis suggests the stock is slightly overvalued at current levels. For deeper insights into Ichor's valuation and 8 additional key ProTips, access the comprehensive Pro Research Report available exclusively on InvestingPro.
In other recent news, Ichor Holdings has reported Q4 revenue near the guidance peak and expects growth in Q1. The company's Q4 earnings conference call revealed a strong liquidity position with a current ratio of 3.64. Ichor's preliminary outlook for Q1 2025 is optimistic, with revenue projections ranging from $235 to $250 million, and an expected gross margin recovery to 13%-15%. The company also anticipates sequential EPS growth compared to Q4 2024.
Despite these positive developments, analysts from Needham have downgraded Ichor's stock from Buy to Hold, citing a mild equipment cycle and valuation concerns. They noted that Ichor's stock is trading at 24 times the next twelve months' price-to-earnings, which is significantly higher than the company's historical peak multiples.
In other recent developments, Ichor reported robust third-quarter results with sales reaching $211 million, marking a 4% sequential growth. The earnings per share stood at $0.12, with an improved gross margin of 13.6%. Looking ahead, the company anticipates a 7% to 10% revenue increase in the second half of 2024 over the first half, and a gross margin flow-through of over 30% in Q4 2024.
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