Yahoo Finance Onto Innovation (ONTO) Surges 43.4% Year to Date: Will the Rally Last?
Onto Innovation’s ONTO shares have been performing well on the trading front, with a gain of 43.4% year to date compared with the S&P 500 composite’s and sub-industry’s growth of 15.2% and 40.5%, respectively.
Improving financial performance has been aiding a good run on the trading front. The stock has gained 5.2% since the announcement of its first-quarter fiscal 2024 results on May 9.
ONTO's earnings outpaced estimates in three of the trailing four quarters and missed the same in one, the average surprise being 2.6%.
Image Source: Zacks Investment Research
The stock is trading down 8% from its 52-week high of $238.13, indicating further upside potential.
With healthy fundamentals and substantial growth opportunities, this Zacks Rank #1 (Strong Buy) company appears to be a solid investment option at the moment.
Apart from a favorable rank, ONTO has a Momentum Score of A. Per Zacks’ proprietary methodology, stocks with a Zacks Rank #1 or 2 (Buy) and a Momentum Score of A or B offer solid investment opportunities.
Factors Driving Growth
Onto Innovation’s performance is gaining from increasing demand for its Dragonfly inspection system. Its Dragonfly G3 platform integrates 2D and 3D technologies to identify yield-killing defects and compute features, which are important for advanced front-end and packaging technologies.
The system is witnessing strong adoption, owing to higher demand for advanced packaging of AI computing devices. In the last reported quarter, revenues from the Dragonfly system increased 30% sequentially. Management expects demand for the system to remain robust in the second quarter as well. It projects overall revenues to be in the $230-$240 million range for the quarter.
In April 2024, the company introduced cutting-edge sub-surface inspection capability for its Dragonfly G3 2D/3D inspection and metrology platform. This innovative capability allows whole wafer inspection by identifying critical defects that have the potential to affect yield and disrupt subsequent processing stages.
In January 2024, the company unveiled a new Firefly G3 inspection and metrology system, designed for automated process control for high-volume production of panel-level substrates. The new Firefly system supports additional process control steps through the use of 3D metrology sensors. This system is capable of measuring film thicknesses and the height of metal RDL lines. The addition of these sensors should enable users to collect the important data needed to mature their process in a relatively shorter time.
Increasing orders, especially for Atlas OCD and Iris planer films, to support advanced logic devices are driving revenues from the advanced nodes market. In the last reported quarter, advanced nodes revenues of $27 million increased 45% sequentially.
It remains focused on inventory reduction to boost cash-flow performance. Improvements in supply-chain initiatives are expected to drive margin performance.
Weak global macro conditions, forex fluctuations and fierce competition are concerns. Management expects DRAM revenues to remain soft in the second quarter.
A Look at Estimates
The Zacks Consensus Estimate for ONTO’s 2024 and 2025 revenues is pegged at $941.2 million and $1.06 billion, respectively, indicating growth of 15.4% and 13.1% from the year-ago levels.
The consensus estimate for 2024 and 2025 EPS implies a rise of 35.4% and 25.1%, respectively, from the prior-year actuals to $5.05 and $6.32.
The consensus mark for 2024 and 2025 EPS has increased 7.4% and 10.7%, respectively, in the past 60 days, reflecting analysts’ optimism.
Other Stocks to Consider
Some other top-ranked stocks worth consideration in the broader technology space are NVIDIA Corporation NVDA, Arista Networks ANET and Woodward WWD, currently sporting a Zacks Rank #1 each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 EPS is pegged at $2.68, which increased 12.1% in the past 60 days. NVIDIA’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 18.4%. The long-term earnings growth rate is 37.6%. Shares of NVDA have risen 203.4% in the past year.
The Zacks Consensus Estimate for Arista Network’s 2024 EPS is pegged at $7.92, which increased 5.7% in the past 60 days. The long-term earnings growth rate is 16.1%. ANET’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 15.4%. Shares of ANET have gained 114.2% in the past year.
The Zacks Consensus Estimate for Woodward’s fiscal 2024 EPS has increased 11.6% in the past 60 days to $5.88. WWD's earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 26.1%. The long-term earnings growth rate is 16.5%. Shares of WWD have risen 54.4% in the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Woodward, Inc. (WWD) : Free Stock Analysis Report
Arista Networks, Inc. (ANET) : Free Stock Analysis Report
Onto Innovation Inc. (ONTO) : Free Stock Analysis Report
