CL King keeps Buy rating on FormFactor as company prepares for downturn

CL King analyst David Silver notes that his firm has recently hosted a series of meetings with senior management of leading global semiconductor wafer test and measurement company FormFactor. The analyst came away with a clear view of management strategies to simultaneously address a number of challenges, namely near-term demand softness and the need to align its operating cost structure, balanced by the opportunity to exploit high long-term growth potential, in part by maintaining critical R&D outlays. An IP-rich product portfolio, strong market positions and collaborative relationships with key customers are some assets that lead CEO Mike Slessor to expect rebounding growth and profitability, likely beginning in the second half of 2023, he adds. Slessor indicated that Q4-to-date business trends are in line with recent guidance. At the midpoints, revenues would sequentially decline by roughly 15%, with gross margins also somewhat below Q3 levels. Restrictions on technology trade with China are a sizable wildcard, the analyst highlights. Silver has a Buy rating on the shares with a price target of $32.