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Tuesday, On Jefferies’ assessment, Onto Innovation Inc. (NYSE: NYSE:ONTO) stock experienced a downgrade from Buy to Hold, accompanied by a reduction in the price target from $135.00 to $110.00. According to InvestingPro data, the stock has declined nearly 56% over the past year, with the current price around $100, significantly below its 52-week high of $238.93. The decision by Jefferies reflects concerns over the anticipated duration of the AI Packaging (NYSE:PKG) market correction, which is now expected to persist through 2026, making 2027 a pivotal year for the company to demonstrate its ability to regain market share.
The analyst from Jefferies highlighted the uncertainty surrounding Onto Innovation’s path to resuming double-digit growth. The report specifically pointed out the potential for a lasting impact on the company’s CoWoS (Chip on Wafer on Substrate) opportunity, suggesting that the market segment could be permanently affected. Despite these concerns, InvestingPro data shows the company maintains strong fundamentals with a current ratio of 8.42 and minimal debt, suggesting financial stability during this challenging period.
In light of these challenges, Jefferies has opted to adopt a more cautious stance on Onto Innovation’s stock. The new price target of $110.00 is based on a 16-times multiple of the company’s projected earnings per share (EPS) of $6.94.
Onto Innovation, which operates in the semiconductor equipment and services industry, has been navigating a shifting landscape as the demand for AI packaging solutions undergoes corrections. The analyst’s comments indicate that the company’s future growth is contingent on its ability to overcome the current market headwinds and reclaim lost ground.
The revised outlook from Jefferies signals a shift in investor expectations for Onto Innovation, as stakeholders anticipate the company’s next moves in a challenging environment. The market will be watching closely to see if Onto Innovation can meet the "show-me story" set for 2027, as it seeks to demonstrate renewed strength and market leadership. Currently trading at a PEG ratio of 0.39, InvestingPro analysis suggests the stock is undervalued relative to its growth potential, with 12 additional exclusive insights available to subscribers through the comprehensive Pro Research Report.
In other recent news, Onto Innovation Inc. reported its first-quarter 2025 earnings, achieving an EPS of $1.51, slightly above the consensus estimate of $1.47, and revenue of $267 million, just surpassing the expected $266.94 million. Despite the company’s record quarterly revenue, Onto Innovation’s guidance for the second quarter has raised concerns among investors, as it projected EPS between $1.21 and $1.35, below the consensus estimate of $1.50, and revenue between $240 million and $260 million, also below the expected $268.5 million. These developments have led to a downgrade from Stifel analysts, who reduced their rating from "Buy" to "Hold" and cut the price target from $165 to $117, citing challenges in the Advanced Packaging segment due to competition. Jefferies, while maintaining a "Buy" rating, lowered its price target to $135, and Evercore ISI adjusted its target to $130, both acknowledging the company’s strong performance in Advanced Nodes but noting a slowdown in other areas. Benchmark Co. also reduced its price target to $190, anticipating some near-term softness but expecting recovery later in the year. Onto Innovation’s CEO, Michael Plisinski, highlighted the robust demand in advanced nodes and the company’s plans to expand manufacturing capabilities in Asia. Despite these strategic moves, the market’s reaction underscores the importance of forward-looking guidance and its impact on investor sentiment.
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