10 Trending AI Stocks on Wall Street’s Radar

7. Teradyne, Inc. (NASDAQ:TER)

Number of Hedge Fund Holders: 43

Teradyne, Inc. (NASDAQ:TER) creates automated test systems and robotic solutions. On January 31, Bank of America Securities analyst Vivek Arya reiterated a Sell rating on the stock and set a price target of $100.00. Several reasons impacting the company’s performance have led to the sell rating by the firm. To begin with, Teradyne reported a beat in Q4 sales and earnings but fell short in its Q1 guidance. This has revealed that it faces challenges in meeting its ambitious targets. The company is also dealing with macroeconomic weaknesses, notably in the smartphone and industrial automation sectors. The firm has pointed out limited opportunities in the rapidly growing AI compute and memory markets given its products aren’t utilized by major players like NVIDIA GPUs and Broadcom ASICs. Other concerns pointed out by the analyst include Teradyne’s continuing investments in the industrial automation sector which are capping its gross margins at 59-60% over the next four years. This is despite a sales growth target of 15% CAGR. Arya also highlighted that the company’s valuation is at a premium compared to its peers, with a 26x price-to-earnings ratio. This ratio is not justified by its limited growth prospects and model leverage.