Teradyne shares climbed more than 6% in premarket trading Thursday after JPMorgan revised its recommendation to Overweight, citing what the bank called an appealing entry point after the stock fell roughly 20% following recent earnings.
The upgrade was explained in a research note by analyst Samik Chatterjee, who said:
"We are upgrading shares of Teradyne to Overweight following the ~20% postearnings pullback in the stock, with the lumpiness in customer purchasing of test equipment driving limited changes to the long-term drivers and secular catalysts."
JPMorgan kept its December 2026 price target at $400, which implies roughly 31% upside from Wednesday's closing price of $306.33. The bank's case for the upgrade rests on four primary demand vectors for automated test equipment (ATE).
- Merchant GPU testing: JPMorgan projects that revenue from merchant GPU dual-sourcing could reach about $1.2 billion by 2028, rising from approximately $50 million guided for 2026 as Teradyne gains share from low-single digits toward 30% over three years.
- Custom AI chips: The proliferation of custom AI silicon developed by hyperscalers and so-called Neoclouds is cited as a secular catalyst supporting longer-term demand for test systems.
- Memory test opportunity: The bank described the memory segment as "the most underappreciated near-term upside vector," forecasting memory test revenue of $1.1 billion by 2028. JPMorgan pointed to greenfield fab deployments from Samsung, SK Hynix, and Micron as sources of capacity-driven demand not yet captured in consensus views.
- Silicon photonics and co-packaged optics: An emerging testing market in silicon photonics and co-packaged optics is also highlighted as an incremental growth area for test equipment sales.
Alongside the upgrade, JPMorgan increased its adjusted earnings per share estimates for Teradyne. The bank raised its 2026 adjusted EPS projection to $7.00 from $6.65 and its 2027 estimate to $9.80 from $9.50. Its published forecasts imply earnings growth of roughly 80% in 2026 followed by about 40% growth in each of 2027 and 2028.
Chatterjee noted execution uncertainty as a material risk. Specifically, JPMorgan warned that Teradyne could fail to reach its $6 billion revenue target even if the broader ATE market expands to $12 billion by 2027, owing to ambiguity around merchant GPU market share. Nevertheless, the analyst argued that upside could come from reaching the $6 billion revenue level shortly after 2027 with less than 25% share in the merchant GPU market because of gains in other ATE total addressable market segments.
Valuation expectations were addressed as well: the bank suggested a valuation multiple in the 35x to 40x range, citing the strong earnings trajectory despite the business's acknowledged lumpiness and limited near-term visibility.
Investors reacted to the upgrade and updated forecasts in premarket trading, bidding the stock higher following the analyst note.