AI And Defense Catalysts Will Support A Stronger Long Term Outlook

Catalysts

About TTM Technologies

TTM Technologies supplies complex printed circuit boards, modules and subsystems for high performance electronics across aerospace and defense, data center, networking and industrial markets.

What are the underlying business or industry changes driving this perspective?

• Rising demand from data center computing and networking, where Q3 2025 sales represented 23% of revenue with 44% year-on-year growth and are expected to reach 28% in Q4, points to ongoing AI related PCB content that can support revenue scale and operating earnings.
• Strong aerospace and defense exposure at 45% of Q3 sales, supported by a program backlog of about US$1.46b and bookings on programs like AMRAAM and APS-153, provides multi year program visibility that can help sustain revenue and segment operating income.
• Expansion of high complexity manufacturing capacity in Penang and the planned second facility in Malaysia, combined with progress on the Ultra HDI PCB plant in Syracuse targeting volume production in the second half of 2026, positions TTM to support future mix rich demand and potentially improve gross margin and adjusted EBITDA once ramp costs normalize.
• Broadening AI related demand beyond data centers into networking and the medical, industrial and instrumentation end market, which saw 22% year-on-year growth in Q3 from robotics, automated test equipment and GenAI applications, supports a larger commercial revenue base and can help earnings diversification.
• Focus on higher layer count and more complex PCB technology, including work on up to 87 layer boards and tighter pitches, reinforces TTM's role in performance critical applications such as heterogeneous chip integration, which can support pricing power and net margins within its high end mix.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more optimistic perspective on TTM Technologies compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming TTM Technologies's revenue will grow by 23.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 6.3% today to 12.4% in 3 years time.
• The bullish analysts expect earnings to reach $735.1 million (and earnings per share of $6.89) by about July 2029, up from $195.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 40.8x on those 2029 earnings, down from 77.0x today. This future PE is greater than the current PE for the US Electronic industry at 29.4x.
• The bullish analysts expect the number of shares outstanding to grow by 0.52% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.89%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Roughly 80% of current sales are tied to aerospace and defense and AI related demand. Any slowdown in defense budgets, program cancellations, or a moderation in GenAI infrastructure spending could weigh on orders and reduce revenue growth and earnings power over time.
• Gross margin already reflects ramp up costs at the Penang facility, and management acknowledges prior optimism on the timing of this ramp. If yields and productivity take longer than expected to reach mature levels, ongoing start up drag could limit gross margin expansion and adjusted EBITDA.
• The automotive end market is already seeing softer demand and inventory adjustments. A more prolonged or widespread reset in auto or other commercial electronics spending would reduce diversification benefits and could pressure overall revenue and operating income.
• Large capital commitments to Penang, Syracuse, and additional investments in China are being funded by significant cash flow and net capital spending. If end market growth does not support this added capacity, returns on these projects could be lower than intended and weigh on future earnings and cash generation.
• Management emphasizes growth, high gross margin, and healthy EBITDA as top priorities and plans to invest hundreds of millions across facilities and possibly acquisitions. If competitive or pricing pressures in high end PCBs and subsystems intensify, the company may find it harder to sustain current margin levels and net income.

Valuation

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

• The assumed bullish price target for TTM Technologies is $220.0, which represents up to two standard deviations above the consensus price target of $212.0. This valuation is based on what can be assumed as the expectations of TTM Technologies's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be $5.9 billion, earnings will come to $735.1 million, and it would be trading on a PE ratio of 40.8x, assuming you use a discount rate of 8.9%.
• Given the current share price of $144.85, the analyst price target of $220.0 is 34.2% 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.