PDF Solution's Price Target Boosted From $20 To $30 By D.A. Davidson

D.A. Davidson has raised its price target on PDF Solutions, Inc. PDFS shares by $10 to $30 on emerging new catalysts.

Analyst Thomas Diffely, who reiterated his Buy rating on the stock, believes PDF Solutions will record 50–100 percent growth over the next few years on modest recovery in Gainshare royalty business, business wins among new and existing customers in China and the company's new e-beam tool.

Given major fab expansion in China over the next five years, the analyst said PDF Solutions would be an invaluable partner to help improve yields and reduce the overall cost of production.

“The consulting revenue started a couple of quarters ago and the Gainshare (royalty) business should start to ramp over the next few quarters,” Diffely wrote in a note.

Related Link: PDF Solutions Announces Third Fiscal Quarter 2016 Financial Results Release Date

Another catalyst is the company’s new e-beam tool. For context, e-beam is the fastest growing sector in process control and can see very small features, but at a relatively slow pace.

PDF Solutions is in the early stages of releasing its new Design For Inspection (DFI) e-beam tool, which is much faster but requires test vehicles. Thus, the company’s product will complement both the high end e-beam tools and the current optical offerings.

“A combination of all three tool types provides the most information and should ultimately lead to better yields,” Diffely continued.

Early customer demand is strong as two Foundries bought a tool before the official release and many fabless customers are already using DFI compatible test vehicles in their designs.

“We expect modest revenue contribution in 2016, ramping revenue (albeit off of a small base) in 2017, and meaningful revenue in 2018,” Diffely added.

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