Last Update 02 Feb 26

Fair value Increased 19%

FORM: Future Returns Will Depend On Facility Ramp And Margin Execution

Narrative Update on FormFactor

Our analyst price target for FormFactor has moved from US$56.88 to US$67.88. This reflects updated assumptions around revenue growth, profit margins and future P/E expectations that are broadly consistent with recent analyst research on the name.

Analyst Commentary

Recent Street research on FormFactor points to a mix of optimism and caution, with several firms updating targets and one new initiation with a neutral stance. Here is how that feedback breaks down for you.

Bullish Takeaways

Bullish analysts who raised their targets by US$10, US$23 and US$34 are signaling greater confidence that FormFactor's earnings power can support higher valuation levels over time.
The cluster of upward target revisions in a short window suggests a shared view that the company can execute on its current plan, which matters if you are trying to gauge how sustainable current P/E assumptions might be.
Higher targets typically reflect updated views on revenue and margin potential, which can be supportive for investors who see room for FormFactor to justify a stronger multiple versus previous expectations.
The consistency across multiple bullish analysts can give some investors additional comfort that recent assumptions used in valuation work are not based on a single outlier opinion.

Bearish Takeaways

The new neutral initiation signals that not all analysts are ready to endorse an aggressive upside case, which can limit how far valuation stretches before it starts to look full to more cautious investors.
A neutral view often reflects concerns around execution risk, such as the company’s ability to translate its current position into the level of earnings needed to support the higher price targets seen elsewhere.
Cautious analysts may see the recent run in expectations as already embedding optimistic growth and margin outcomes, which can reduce the margin of safety if those outcomes take longer to materialize.
The split between bullish target hikes and a neutral stance underlines that the risk or reward trade off is not one sided, and that investors should think carefully about how much near term volatility they are comfortable with.

What's in the News

FormFactor has begun site work and equipment installation for a new advanced manufacturing facility in Farmers Branch, Texas, which the city describes as one of the most important economic development successes in its history. (Key Developments)
The Farmers Branch facility is planned with an aggressive qualification and ramp schedule, and FormFactor expects over US$140 million of capital investment in 2026 as part of this build out. (Key Developments)
FormFactor reports a large installed base of over 10,000 probe systems globally and shipments of billions of micro electro mechanical systems probes, highlighting the scale of its existing operations as it expands in Farmers Branch. (Key Developments)
From June 29, 2025 to September 27, 2025, FormFactor repurchased 60,000 shares, or 0.08%, for US$1.66 million, bringing total buybacks under the May 6, 2025 program to 135,000 shares, or 0.18%, for US$4.07 million. (Key Developments)

Valuation Changes

The fair value estimate has risen from US$56.88 to US$67.88, an increase of about US$11.00 per share.
The discount rate has edged up slightly from 10.47% to 10.54%, a small change in the rate used to value future cash flows.
The revenue growth assumption has moved modestly higher from 8.58% to 8.92%, indicating a slightly stronger growth outlook in the model.
The net profit margin assumption has risen from 13.63% to 17.10%, representing a material uplift in expected profitability.
The future P/E multiple has shifted down from 44.56x to 42.07x, implying a slightly lower valuation multiple applied to projected earnings.

Expanding presence in AI and advanced chip markets, coupled with strategic manufacturing investments, enhances FormFactor's growth opportunities and long-term profitability.
Diversification across customers and partnerships reduces earnings volatility and increases stability as demand shifts toward AI, custom ASICs, and connectivity solutions.
Margin, revenue, and earnings stability are challenged by unfavorable product mix, concentrated customers, rising costs, trade risk, and intensifying competition in advanced semiconductor technologies.

Catalysts

About FormFactor

Designs, manufactures, and sells probe cards, analytical probes, probe stations, thermal systems, cryogenic systems, and related services in the United States and internationally.What are the underlying business or industry changes driving this perspective?

Accelerating adoption of generative AI, high-performance computing, and HBM DRAM in data centers is driving substantial increases in test complexity and intensity-FormFactor's differentiated probe cards and early leadership in HBM4 chiplet testing position the company to benefit from higher ASPs and revenue growth as these markets scale. (Impacts: Revenue, potential margin improvement)
Broader diversification and increased penetration with all three major HBM DRAM manufacturers, plus growing engagement with hyperscaler and custom ASIC customers, reduces historical customer concentration risk and smooths volatility, supporting more stable earnings and extending future market opportunity as AI-related semiconductor spending rises. (Impacts: Revenue stability, earnings visibility)
Strategic investments in new manufacturing capacity (Farmers Branch, Texas) and vertical integration via organic substrate partnerships aim to expand production, lower long-term operating costs, and leverage financial/regulatory incentives-enabling margin expansion and improved profitability as AI and advanced packaging demand intensifies. (Impacts: Gross margins, net margins)
Shift in test demand from mobile/PC to AI, custom ASICs, GPU, and co-packaged optics markets, along with closer collaboration with foundries and OSATs, increases exposure to secular growth areas in connectivity and data infrastructure-positioning FormFactor to capture a greater share of high-growth, high-complexity semiconductor testing revenue streams. (Impacts: Long-term revenue growth)
The anticipated 2026 ramp in silicon photonics and co-packaged optics pilot programs is expected to drive higher demand for advanced probing/test equipment, targeting the data center energy efficiency bottleneck and providing additional runway for revenue growth and product differentiation amidst broader expansion of IoT and connected device semiconductors. (Impacts: Revenue, product mix, margin potential)

FormFactor Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming FormFactor's revenue will grow by 8.8% annually over the next 3 years.
Analysts assume that profit margins will increase from 5.7% today to 9.9% in 3 years time.
Analysts expect earnings to reach $97.0 million (and earnings per share of $0.78) by about September 2028, up from $43.9 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 34.6x on those 2028 earnings, down from 51.7x today. This future PE is greater than the current PE for the US Semiconductor industry at 33.5x.
Analysts expect the number of shares outstanding to decline by 0.43% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.03%, as per the Simply Wall St company report.

FormFactor Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent gross margin pressure from an unfavorable product mix (shift towards historically lower-margin DRAM and fluctuating Systems segment contributions), operational cost increases, and rising tariffs have eroded profitability, making it difficult for FormFactor to demonstrate a clear path to their long-term target model of 47% gross margin, which may constrain future net margins and earnings.
FormFactor faces ongoing volatility in DRAM and HBM demand, as revenue remains highly concentrated with a few large customers and these customers' output is tied to a small number of designs with short lead times; this customer concentration risk and product cycle volatility could create material swings in quarterly revenue, impacting earnings stability.
Higher operating expenses are expected due to increased headcount, salary adjustments, and ramp-up costs for the new Farmers Branch facility, while benefits from this new Texas manufacturing site (cost reductions and efficiency improvements) may take time to materialize, leading to possible margin and cash flow compression in the interim.
The company is exposed to rising geopolitical and regulatory risks, particularly from U.S.-China trade tensions and tariffs, which are estimated to reduce gross margin by up to 1.5–2 percentage points; continued or worsening trade barriers could further escalate costs, disrupt supply chains, and decrease future profitability.
Technological disruption and competition remain significant long-term risks: slow adoption or missed execution in high-growth areas such as advanced packaging, chiplet integration, co-packaged optics, and quantum computing could allow competitors to seize market share and result in revenue shortfalls; additionally, if semiconductor manufacturers insource probe card production or vertically integrate, FormFactor could see reduced demand and further gross margin and revenue pressure.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $33.125 for FormFactor based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $45.0, and the most bearish reporting a price target of just $23.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $984.3 million, earnings will come to $97.0 million, and it would be trading on a PE ratio of 34.6x, assuming you use a discount rate of 10.0%.
Given the current share price of $29.43, the analyst price target of $33.12 is 11.2% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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