FormFactor (FORM) is a $2.5 billion OEM of automated wafer probe cards and other testing devices used in the back-end portion of the semiconductor manufacturing process. 

FORM serves the requirements of the companies that design or make semiconductor and related products in the Foundry & Logic, DRAM, Flash, Display and Sensor markets.

The company’s product portfolio is comprised of probe cards, analytical probes, probe stations, thermal sub-systems, and related services.

FormFactor reported revenues of $763.6 in 2024, with SK Hynix accounting for 22% of the company’s top-line. This year's sales consensus now calls for growth of only 1.2% to $773 million, after their disappointing Q4 report and guidance in early February.

And analysts have taken EPS estimates for the year down over 20% from $1.63 to $1.26, slipping below 10% annual growth. This is the primary catalyst making FORM shares a Zacks #5 Rank.

What Does FORM Make?

We'll look at FormFactor's guidance for the year after we dive into their core business.

Probe Cards help FormFactor to serve customers’ design layout and electrical test requirements by testing semiconductor device types such as systems on a chip (SoC), mobile application processors, microprocessors, microcontrollers, graphic processors, radio frequency, analog, mixed signal, image sensors, electro-optical, dynamic random-access memory (DRAM), NAND flash memory and NOR flash memory devices.

Analytical probes cater to the needs of a diverse set of applications such as device characterization, failure analysis, prototype design debugging and electrical simulation model development.

Probe stations are designed to take care of customers’ complex measurement requirements by creating integrated measurement systems.

Thermal sub-systems aid in the testing of devices at a particular temperature or across a range of temperatures by producing thermal chucks and other test systems.

FORM’s Q1 Guidance

FormFactor is facing headwinds due to weaker demand in high-volume markets like client PCs and mobile handsets. The expected sequential decline in demand for non-HBM DRAM probe cards and systems further reinforces a cautious outlook for the first quarter of 2025.

FORM expects first-quarter 2025 revenues of $170 million (+/- $5 million), about $20 million below prior consensus estimates.

The company expects a non-GAAP gross margin of 38% (+/- 1.5%).

On a non-GAAP basis, FORM expects earnings of 19-cents (+/- 4 cents) per share vs prior EPS estimates of 33-cents.

Owing to its manufacturing locations in Asia, the company derives most of its revenues from the region. North America has started to grow in recent quarters because of the increasing level of manufacturing activity in the region.

Bottom line: FormFactor plays a key role in the precision testing of semiconductor foundry products. But the current growth slump should make investors cautious here as the stock trades over 25X EPS. The next quarter or two should tell us if a turnaround is afoot. The Zacks Rank will let you know. 

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This article originally published on Zacks Investment Research (zacks.com).

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