Needham analysts reaffirmed their Buy rating for Onto Innovation (NYSE:ONTO) while lowering the price target to $220 from $230. Despite the adjustment, Onto has been added to the Needham Conviction List, and named as the firm’s top pick for 2025, citing its strong position in advanced technologies and minimal exposure to China.
According to the analysts, Onto Innovation’s limited reliance on the Chinese market remains a key strength, especially as geopolitical challenges persist in the semiconductor industry. The company’s strategic focus on advanced node technologies and partnerships with leading clients positions it for industry-leading growth in 2025, even as wafer fabrication equipment (WFE) peers face broader headwinds.
AI demand is expected to be a significant growth driver, particularly through Onto’s involvement in advanced packaging, bolstered by TSMC’s CoWoS spending and opportunities related to high-bandwidth memory (HBM). Although the company has previously expressed caution about HBM, its advanced packaging segment is forecasted to remain strong throughout 2025. Advanced node revenue, already recovering in the fourth quarter of 2024, is anticipated to grow over 40% in 2025, even with a conservative projection.
By segment, growth in gate-all-around (GAA) technologies is expected to continue throughout the year, with DRAM, particularly from Samsung, showing renewed strength in the first half of 2025. While Onto’s advanced node business has traditionally leaned toward NAND, the analysts mentioned that any recovery in NAND-related spending would serve as an additional boost to its performance.