On Monday, Citi adjusted its outlook on Cohu , Inc. (NASDAQ:COHU) shares, a semiconductor test equipment supplier, by reducing its price target from $40.00 to $36.00. Despite the cut, the firm has sustained its Buy rating on the stock.
Cohu reported March-quarter results that aligned with expectations but provided guidance for a slight decrease in June-quarter revenue, projecting a 2% quarter-over-quarter dip or 3% below the market consensus. This downtrend is primarily attributed to the mobile sector.
The company noted a modest increase in test cell utilization rates for the March quarter, rising by one percentage point to 72%, while rates for mobile and compute hovered in the high-60s. Automotive and industrial utilization rates were stronger, standing at 78%.
The company anticipates the business climate to remain steady for the next one to two quarters, with potential improvements expected in the December quarter. Cohu also foresees growth in the year 2025. Additionally, Cohu has raised its gross margin target by 1% in its mid-term target model, attributing the increase to improved cost profiles. The company also highlighted AI on-the-edge technology as a key factor in achieving the $1 billion revenue target.
Citi has revised its earnings per share (EPS) estimates for fiscal years 2024 and 2025 downward by $0.41 and $0.21, respectively, due to a slower-than-anticipated recovery. The new price target of $36 reflects a consistent 19 times price-to-earnings (P/E) multiple based on the estimated earnings for calendar year 2025.
InvestingPro Insights
As Citi revises its stance on Cohu, Inc. (NASDAQ:COHU), investors may benefit from additional context provided by InvestingPro metrics and tips. Cohu's market capitalization currently stands at $1.39 billion, and while the company's P/E ratio appears significantly high at 8065.64 for the last twelve months as of Q1 2024, this could be indicative of investor expectations for future earnings growth. The revenue for the same period has seen a considerable decline of 28.93%, which aligns with analysts' anticipation of a sales decline in the current year.
InvestingPro Tips highlight that Cohu holds more cash than debt on its balance sheet, which could provide some financial flexibility in challenging market conditions. Additionally, the company's liquid assets exceed its short-term obligations, suggesting a solid short-term financial position. However, it's worth noting that analysts expect net income to drop this year, and the stock has been trading near its 52-week low, reflecting the cautious sentiment around the company's near-term prospects.
For investors seeking more comprehensive analysis, there are additional InvestingPro Tips available that could shed light on Cohu's valuation and future profitability. By using the coupon code PRONEWS24, investors can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, which includes access to these valuable insights. With the next earnings date set for August 1, 2024, and a fair value estimate of $36 by analysts versus InvestingPro's fair value of $29.28, investors should consider these factors in their decision-making process.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.