Teradyne (TER) shows core business strength, but further upside would depend on the company winning "substantial" business from Nvidia (NVDA), Morgan Stanley said in a note Monday.

The firm lifted its 2026 and 2027 estimates to 8% and 3% above consensus, citing strong momentum across key segments. Growth expectations for the compute segment were lifted to 30% from 18% previously on robust networking demand, while the memory business is projected to deliver record H2 revenue driven by system-level testing, according to the note.

Revenue tied to Apple (AAPL) is also expected to surpass transistor count growth, reflecting gains from advanced packaging technology, Morgan Stanley said.

Despite the raised estimates, Morgan Stanley said any further significant stock appreciation hinges on Teradyne securing a major deal with Nvidia for its testing equipment.

Morgan Stanley raised its price target on Teradyne to $136 from $100, while maintaining an equal weight rating.

Price: 138.09, Change: -1.04, Percent Change: -0.75