TTM's AI and Defense Growth Highlights Execution, But Valuation Remains Stretched

What happened

A Seeking Alpha article highlights TTM Technologies' transformation into a strategic supplier for AI infrastructure and defense, citing 80% of revenue from resilient sectors and 57% annual growth in its data center segment. It points to a record $1.61 billion backlog and a 1.46 book-to-bill ratio, suggesting robust revenue visibility through at least 2027. However, the DeepValue master report notes that this growth narrative is already priced into the stock, which trades at ~52x earnings and ~23x EV/EBITDA, far above a DCF-based intrinsic value of ~$6.73. While TTM has successfully repositioned its portfolio with improving financials, the report warns of persistent risks including customer concentration, execution challenges on new facilities, and the cyclical nature of the PCB industry. Thus, the positive news reinforces operational progress but does not alleviate the valuation concerns underpinning a strong sell recommendation.

Implication

The growth in AI and defense sectors validates TTM's strategic pivot and could support near-term revenue and margin expansion. However, at current prices, the stock fully discounts this optimistic scenario, leaving little room for error. Key risks include potential execution missteps on capacity expansions in Syracuse, Penang, and Eau Claire, which could pressure margins and free cash flow. Additionally, the company's high leverage and dependence on a few large customers in cyclical markets amplify downside risks in a downturn. Therefore, value-oriented investors should wait for a significant price correction or clearer evidence of sustained profitability before considering an entry.

Thesis delta

The new article confirms the growth trajectory already acknowledged in the DeepValue report, but it does not address the core valuation disconnect. The strong sell stance remains unchanged, as the stock's euphoric pricing still fails to account for cyclical risks and execution uncertainties.