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On Friday, Stifel analysts downgraded Onto Innovation Inc. (NYSE: NYSE:ONTO) stock from "Buy" to "Hold," also reducing the price target to $117 from the previous $165. The stock, currently trading at $87.10, has seen significant pressure recently, falling nearly 28% over the past six months. According to InvestingPro data, the company maintains a "GREAT" financial health score, with 12 key insights available for subscribers. The decision followed Onto Innovation’s earnings report released after the market closed on Thursday, which showed first-quarter results were on par with expectations. The company’s revenue from advanced nodes was notably robust, nearly doubling quarter-over-quarter and is projected to maintain strength in the first half of the year.
Despite the strong performance in advanced nodes, Onto Innovation provided a second-quarter revenue and earnings outlook that fell short of both Stifel’s and the consensus estimates. The analysts highlighted that while advanced nodes are likely to experience a sharp recovery in the first half of the year, the company’s Advanced Packaging (NYSE:PKG) segment is generating revenue well below expectations. The company’s fundamentals remain solid, with impressive last twelve-month revenue growth of 21.2% and a healthy gross margin of 52.7%. For deeper insights into Onto Innovation’s financial performance, InvestingPro subscribers can access comprehensive analysis and valuation metrics in the Pro Research Report. This shortfall is attributed to heightened competition, notably from KLA, which Onto’s management largely recognized during their earnings call.
Stifel’s revised estimates for the second half of 2025 and the calendar year 2026 reflect a more cautious outlook due to these competitive pressures. The analysts noted that Onto is expediting the development and launch of its next-generation inspection platform. However, they anticipate that the stock will remain range-bound as the company strives to regain and stabilize its market share in the logic Advanced Packaging sector.
The new price target of $117 is based on 16 times Stifel’s projected earnings per share for the calendar year 2026, plus Onto’s net cash. This adjustment represents a significant decrease from the previous target, underscoring the challenges Onto Innovation faces in the near term. The report concludes with Stifel’s position that, given the current market dynamics, a "Hold" rating is now warranted for Onto Innovation stock. The company currently trades at a P/E ratio of 21.15 and maintains exceptional liquidity with a current ratio of 8.42. InvestingPro’s Fair Value analysis suggests the stock may be undervalued at current levels, with analyst targets ranging from $110 to $235.20.
In other recent news, Onto Innovation reported its financial results for the first quarter of 2025, showcasing an EPS of $1.51, which slightly exceeded the consensus estimate of $1.47. The company’s revenue also surpassed expectations, reaching $267 million, a 17% increase compared to the same quarter last year. Despite these positive results, Onto Innovation’s stock faced a downturn following the announcement of lower-than-expected guidance for the second quarter. The company projected EPS for Q2 2025 to be between $1.21 and $1.35, falling short of the consensus estimate of $1.50, with revenue expectations ranging from $240 million to $260 million, below the anticipated $268.5 million. Analysts responded to the guidance by adjusting their views, with Stifel downgrading the stock to hold and Jefferies lowering its price target while maintaining a buy rating. Evercore ISI also reduced its price target, expecting near-term weakness, while Benchmark Co. adjusted its target, anticipating a rebound after Q3 2025. Furthermore, Onto Innovation announced plans to expand its manufacturing capabilities in Asia, aiming to mitigate the impact of tariffs and enhance business continuity. Despite the challenges, Onto Innovation’s CEO highlighted the company’s achievements, including robust demand in advanced nodes and growth in the packaging market.
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