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On Tuesday, Stifel analysts maintained a Hold rating on FormFactor stock with a steady price target of $48.00. The semiconductor company, listed on (NASDAQ:FORM), is anticipated to report its fourth-quarter earnings after the market closes on Wednesday. According to InvestingPro data, the stock currently trades near Fair Value, with analyst targets ranging from $44 to $65. The company maintains a strong financial position, with a healthy current ratio of 4.76 and more cash than debt on its balance sheet. Analysts at Stifel project that the results will marginally surpass their estimates, landing in the upper half of the provided guidance range.
For the fourth quarter of 2024, the analysts expect FormFactor’s foundry-logic revenue to decrease by approximately 20% quarter-over-quarter, attributing the dip to subdued consumer seasonality. However, they forecast a slight sequential increase in DRAM revenue, which marks a substantial 75% year-over-year growth. InvestingPro analysis shows the company has maintained strong profitability with a gross margin of ~41% and revenue growth of 12.3% over the last twelve months. The analysts speculate that Intel (NASDAQ:INTC) might contribute to the quarter-over-quarter decline, but suggest that a lower fourth-quarter run rate could mitigate this impact.
Looking ahead to the DRAM segment, Stifel analysts believe that the robust growth momentum experienced in 2024 is likely to decelerate due to more challenging year-over-year comparisons. Nonetheless, they remain optimistic that fourth-quarter run rates will stabilize as other customers commence ramping up High Bandwidth (NASDAQ:BAND) Memory (HBM) production.
The Stifel team also anticipates that FormFactor will at least meet their first-quarter 2025 estimates, which include a forecast of 9% year-over-year revenue growth. Their confidence in this prediction would be bolstered by indications of a broader unit-driven recovery in the market. Despite this outlook, they acknowledge that visibility into future performance remains limited.
Supporting their cautious optimism, Stifel cites Teradyne (NASDAQ:TER), a fellow test equipment supplier, which has expressed a measured optimism regarding the potential improvement of broader test conditions in the latter half of the year. This sentiment aligns with the expectation that the semiconductor industry could see a gradual recovery as the year progresses. With an overall "Good" financial health score from InvestingPro, FormFactor appears well-positioned for potential market improvements. Subscribers can access 8 additional ProTips and a comprehensive Pro Research Report, offering deeper insights into FormFactor’s market position and growth potential.
In other recent news, FormFactor has been a subject of analyst attention with Stifel maintaining a Hold rating and a price target of $48.00, while Citi upgraded the stock to Buy and raised the price target to $51.00. Stifel’s stance is based on the company’s stable position in the High Bandwidth Memory (HBM) DRAM market, expecting FormFactor to match its 2021 revenue levels as it exits 2024. Citi’s upgrade, on the other hand, is grounded on FormFactor’s strong position in the HBM sector, especially its dominant share at SK Hynix’s HBM business.
Recent developments also indicate that FormFactor is working to diversify its front-line business into the GPU segment with major industry players. This strategy is expected to broaden the company’s revenue base and reduce dependency on more volatile market segments. Further, FormFactor’s revenue from China is reportedly at a low percentage in comparison to its semiconductor capital equipment peers, with domestic business expected to decrease in the future.
In related news, semiconductor equipment companies, including FormFactor, have seen stock increases following a series of analyst upgrades. These upgrades come despite a challenging environment for the sector, with analysts expecting key performance indicators to bottom out in the first half of 2025.
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