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Investing.com -- Jefferies raised Onto Innovation to Buy, saying the chip equipment maker is set to bounce back from a difficult 2025 as revenue bottoms early next year and growth resumes in the second half of 2026.
Onto can regain lost share in chip packaging technology known as CoWoS, brokerage said after it hosted management meetings.
“Upgrading ONTO to BUY given renewed confidence in the ability to regain lost CoWoS share after hosting management on the road last week,” analysts at Jefferies said.
It expects shipments of the company’s new Dragonfly G5 inspection tool, which addresses past yield issues, to begin by mid-2026 and gradually restore share against rival KLA.
Jefferies also pointed to tighter memory markets and new accelerator builds as demand drivers. It said Samsung’s expected qualification of HBM4 with Nvidia will weigh on sales in the first half of 2026 but pave the way for stronger demand later in the year.
Onto has faced share losses and inventory headwinds this year, but Jefferies said new tools, limited China exposure, and the pending $130 million Semi Lab acquisition should boost growth. The deal is expected to add more than 10% to earnings per share once it closes.
The brokerage lifted its 2026 and 2027 EPS forecasts to $5.55 and $7.08 respectively and raised its price target to $170, valuing the stock at 24 times 2027 earnings.