Manufacturing-based industries have been hard hit due to the pandemic. Although manufacturing is coming back on track in most industries, some still bear bruises from the global shutdowns. A key problem for many is the shortage in semiconductors.
Cohu Inc. (COHU), the California-based global leader in back-end semiconductor equipment and services, is likely to experience a spur in demand of its offerings. Manufacturers will strive to expand capacity in order to augment production, especially because the chip shortage is likely to persist this year and next year too. Notably, in the past year, Cohu shares skyrocketed almost 122%. (See Cohu stock chart on TipRanks)
In his coverage, Rosenblatt Securities’ analyst Scott Graham is optimistic about the stock, stating that with the revival of the auto and industrial markets, Cohu’s sales are likely to benefit. He also expects sales to gain due to Cohu’s targeted strategies of tapping growth niches in its markets.
Furthermore, he believes that the productivity strategies of Cohu are expected to drive margins. Notably, the new operating model of the company targets higher margins compared to the current margin. Though the analyst expects mix to impact gross margin in the near term, strong non-GAAP operating margin expansion is forecast in future periods.
Graham initiated a Buy rating on the stock with a price target of $65. This suggests a potential 12-month upside of 76.7%.
The five-star analyst explained that “the recent secondary and concerns over mix have restrained the stock and reduced its valuation relative to peers. But we expect this will be displaced by outperformance over the next year from high quality earnings growth and a building cash balance / acquisition opportunity.” Notably, Graham’s estimates exceed the Street forecast.
On TipRanks, Cohu has an analyst rating consensus of Strong Buy, based on 6 Buy and 1 Hold ratings. The average Cohu price target is $59.86, representing a possible 12-month upside of 62.7%.
What’s more, Cohu scores a 9 of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your analysis before making any investment.
