Analyst Krish Sankar of TD Cowen maintained a Hold rating on Formfactor, with a price target of $35.00.
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Krish Sankar has given his Hold rating due to a combination of factors impacting FormFactor’s financial performance and outlook. The company’s recent quarterly results showed a strong topline performance, reaching the high end of previous guidance. However, profitability was affected by an unfavorable product mix and unexpected costs related to ramping up production for a second HBM customer. These factors have contributed to a dip in probe card margins, which have fallen below 40%, and may continue to be constrained by the product mix headwinds from HBM sales.
Despite these challenges, there are positive aspects to consider. FormFactor’s qualification with all three major HBM manufacturers could help diversify its customer base and reduce reliance on SK Hynix. Additionally, an expected increase in the systems mix in the upcoming quarter could support margin improvement. However, the increased capital expenditure required to bring the new Farmers Branch facility online, along with higher tax rates and potential tariff impacts, present short-term headwinds. While the core business is well-positioned for long-term growth due to rising chip complexity, achieving the target model margins remains challenging given the current sales mix and market conditions.
In another report released today, Northland Securities also maintained a Hold rating on the stock with a $23.00 price target.