The Case for Teradyne (NYSE: TER)

Brit Ryle

Posted September 27, 2023

So, we’ve talked more than a little about the 4,300 level on the S&P 500 recently. Sorry about that!

Seriously though, 4,300 is an important number for the stock market. Because that’s the point at which the S&P 500 signaled that a new Bull Market had begun, back on June 8.

For the record – a bull market becomes “official” when stocks have rallied 20% higher off of a  bear market low. The bear market low closing price was set last October at 3,577. And it finally closed 20% higher on June 8. The actual closing level for the S&P 500 on June 8 was 4,293, but what’s 7 points among friends?

Now, as an aside, I’m not aware of any particular reason that 20% was chosen as the required rally size for a bull market. It’s kinda arbitrary. And maybe not even very helpful, because if you wait for that 20% rally before buying stocks, well, you just missed a 20% rally. 

What’s more, the S&P 500 turned bullish a lot sooner than June 8. Inflation started falling late last year, and I started with the bullish articles and stock recommendations here at Pro Trader Today in early January. I recommended both Bank of America (NYSE: BAC) and Meta (NASDAQ: META) that day…

Bank of America is actually lower now than it was then, which seems weird. But Meta makes up for it – it was $139 when I said it was a good way to play the 2023 rally. Shares are just under $300 now.


So now that the S&P 500 has fallen back below the bull market breakout point at 4,300, does that mean we’re back in bear market territory?

Well, even though it might feel like a bear market – with a litany of negative news and some fairly ferocious selling – the fact is, it’s just the last few days of September. 

To get back to an actual bear market, the S&P 500 has to drop 20% from recent highs. So we’re about halfway there…

But like I told you Monday, I think we’re a whole lot closer to a low than we are to a high…which is another way of saying that there is upside coming.

Earnings in Focus

I told you now is the time to add quality stocks for a rally into the end of the year. I stand by that. Earnings season starts on October 15, and analysts have been raising earnings expectations, which is the opposite of what usually happens during the month before earnings. 

Point being: when companies start reporting third quarter earnings in a couple weeks, they’re likely to be pretty good.  

I’ve already offered up a couple companies over the last week that have really nice earnings growth coming for 2024. 

Carnival Cruise Lines (NYSE: CCL) is expected to see a $0.15 loss this year rebound to a $0.93 a share profit in 2024. 

And furniture maker Lovesac (NASDAQ: LOVE), which I recommended on Monday, should see earnings grow better than 50% next year, which is also darn good. And its forward P/E is really low, around 10.

If you’re looking for more earnings growth stories check out the two EV stocks I cover, Rivian (NASDAQ: RIVN) and Fisker (NYSE: FSR). Fisker especially – it goes from virtually 0 revenue earlier this year, to a bit over $1 billion in revenue by the end of 2023, to over $3 billion in revenue next year. And there’s a distinct possibility that the Fisker could be turning a profit by the end of 2024. The stock will be higher then than it is now. Same for Rivian…

Today I’ve got another stock with strong earnings growth coming in 2024 to tell you about…

The Case for Teradyne (NYSE: TER)

Teradyne makes semiconductor test equipment. It’s a boring but vital step in the chip making process. Because it’s inevitable that there will be some rate of failure in the semiconductor fabrication process, and it’s bad form for a company to send out chips that don’t work.

I’ve covered another semiconductor test equipment company called Aehr Systems (NASDAQ: AEHR) in the Diamond Chip report, which is worth checking out

But as for Teradyne, the important thing is that earnings are expected to grow from $2.85 a share this year to $4.59 a share in 2024. That’s 60% earnings growth…

Earnings growth that strong for a semiconductor test equipment company suggests that chip sales should be very strong next year. 

Now Teradyne is pretty darn cheap. The forward P/E is less than 17, and its PEG ratio is under 1. 

The shares currently trade around $97. They were $110 a month ago, and $120 back in July. 

Teradyne looks like a very good bet to challenge those $120 highs before the end of the year.

That’s it for me today, take care and I’ll talk to you Friday.

Briton Ryle
Chief Investment Strategist
Pro Trader Today