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On Friday, TD Cowen adjusted its price target for Cohu (NASDAQ:COHU), a semiconductor test equipment supplier, reducing it to $30.00 from the previous $36.00. Despite the lowered price target, the firm maintained a Buy rating on the stock. The adjustment comes after a review of the company's recent financial performance and market conditions.
In the September 2024 quarter, Cohu reported margins and operational expenditures that surpassed expectations, attributed to effective labor and manufacturing cost controls. The company's sales results for the quarter, as well as the guidance for December 2024, met analyst expectations, showing stability in their financial outcomes.
The analyst from TD Cowen noted that test utilization, which remained in the low-70% range, presents a near-term challenge for Cohu. However, the company's ability to secure design wins is seen as a positive sign, providing potential growth opportunities as market conditions improve.
The statement from TD Cowen highlighted that, while near-term headwinds exist, Cohu's performance in controlling costs and securing new design wins lays a foundation for growth as the markets recover. The new price target of $30 reflects these considerations.
In other recent news, Cohu, Inc. reported a steady financial performance for its third-quarter 2024 earnings, with revenues reaching $95.3 million and a gross margin of 47%. A significant 67% of the total revenue came from recurring sources, demonstrating the company's resilience in a challenging market. The firm has also made strategic advancements into high growth areas like high bandwidth memory (HBM) and silicon carbide markets.
Cohu's mobile segment recorded a 13% year-over-year growth and the company secured a significant test cell design win in the automotive sector. For the fourth quarter, Cohu anticipates revenues to remain stable at around $95 million, with a gross margin of 44%. Despite a non-GAAP EPS loss of $0.08 for Q3, the company's cash and investments rose to $269 million.
Looking ahead, Cohu expects a 10% revenue increase for Q1 2025. The company is also set to participate in the Stifel Midwest Conference and the Needham Growth Conference.
InvestingPro Insights
Adding to TD Cowen's analysis, recent data from InvestingPro provides further context on Cohu's financial position and market performance. As of the last twelve months ending Q2 2024, Cohu's revenue stood at $500.35 million, with a significant revenue decline of 32.94% year-over-year. This aligns with the challenges noted in the analyst report, particularly regarding test utilization rates.
InvestingPro Tips highlight that Cohu holds more cash than debt on its balance sheet, which could provide financial flexibility as the company navigates current market headwinds. Additionally, liquid assets exceed short-term obligations, potentially offering a buffer against near-term challenges.
However, it's worth noting that Cohu is not currently profitable, with a negative operating income of $24.36 million in the last twelve months. This underscores the importance of the cost control measures mentioned in the TD Cowen report.
The stock's price movements are described as quite volatile, which investors should consider in light of the industry challenges and potential recovery scenarios discussed. With a market cap of $1.27 billion and trading at a high EBITDA valuation multiple, the market appears to be pricing in future growth potential, aligning with TD Cowen's maintained Buy rating despite the lowered price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for Cohu, providing a deeper dive into the company's financial health and market position.
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