Craig-Hallum has moved its price objective for Ultra Clean Holdings Inc. to $100 from $35 while retaining a Buy rating, reflecting the firm's expectation that a multiyear expansion in wafer fabrication equipment (WFE) spending will support revenue and margin recovery for the company.
The shares were trading at $67.92 at the time of the update, a level noted in the report as being close to the company's 52-week high of $61.64. Year-to-date the stock has posted a substantial advance of 142%.
Analysts at Craig-Hallum point to an anticipated WFE spending cycle driven by memory chip investment and advanced foundry logic as the primary catalyst. Company management has guided to WFE growth of 15% to 20% in 2026 compared with 2025, and said product revenue should track that direction, with sales skewed toward the second half of the year.
Operationally, Ultra Clean's product manufacturing utilization rate sits at 65% currently. Craig-Hallum modeled margin recovery that would lift product gross margins by roughly 150 basis points by the end of 2026 from the recently reported level of 14.1%, with the potential for a further approximately 150 basis point increase in 2027 as revenue ramps.
Over the last twelve months, the company’s gross profit margin registers at 16%, though at least one market note flagged that gross profit margins remain weak relative to peers. Consensus analyst expectations call for the company to return to profitability this year, and the stock carries a "Strong Buy" consensus rating among analysts referenced in the update.
Management also highlighted the services business as a key growth driver. The company expects services revenue to expand in the double digits year-over-year in 2026, up from roughly 4% growth in 2025. Services carry gross margins that are approximately twice those of product gross margins, giving that segment outsized leverage to margin expansion if the growth materializes.
Craig-Hallum further noted that in scenarios tied to WFE spending, Ultra Clean has historically outpaced WFE growth by more than 10%.
On the most recent quarterly results, Ultra Clean reported fourth-quarter 2025 earnings per share of $0.22, a slight miss versus the forecast of $0.23. Revenue for the quarter came in at $506.6 million, narrowly above the expected $503.34 million. For the first quarter of 2026, the company provided guidance of $525 million in revenue, representing a 4% sequential increase and a projection that the firm said exceeds analysts' expectations.
Other brokerages have reacted positively in recent days. TD Cowen and Needham each raised their price targets on the stock to $70. TD Cowen pointed to an increasingly positive view within the semiconductor industry of leading-edge foundry/logic and DRAM HBM, trends it expects to be favorable for companies such as Ultra Clean in 2026. Needham reiterated a Buy rating alongside its target increase.
Context and implications
- The analyst upgrade to $100 reflects a view that a cyclical rebound in WFE spending will lift product revenue and support margin recovery.
- Services growth and higher services margins represent a complementary path to profitability and earnings leverage.
- Recent quarterly results were mixed, with a small EPS miss but a slight revenue beat and above-consensus guidance for the first quarter of 2026.
The outlook outlined by Craig-Hallum and echoed in part by other brokerages signals a constructive near-to-medium-term operating environment for Ultra Clean if WFE spending materializes as forecast. However, the company’s margins remain a focal point for improvement as revenue scales.