RBC Capital initiates Onto Innovation stock at Outperform on WFE growth

Investing.com reports that RBC Capital has initiated coverage on Onto Innovation Inc. (NYSE:ONTO) with an Outperform rating and a price target of $400.00. The firm believes the semiconductor inspection and metrology equipment supplier is well-positioned to capitalize on a strong wafer fabrication equipment spending cycle, increasing process control intensity, and market share gains.

RBC Capital expects Onto Innovation's 2.5D/3D inspection business to outpace the growth of wafer fabrication equipment, driven by high-bandwidth memory, chip-on-wafer-on-substrate, and embedded multi-die interconnect bridge expansion. The Dragonfly G5 product launch is cited as a key catalyst through 2027. The analyst believes the current valuation, with a price-to-earnings ratio of 27, is attractive given the company's growth prospects, margin execution, and longer-term visibility.

The shares currently trade at a P/E ratio of 115, though InvestingPro analysis suggests they are overvalued at present. For those seeking more detailed analysis, InvestingPro provides 16 additional tips and comprehensive financial metrics. Onto Innovation reported strong earnings for Q2 2026, beating expectations with $1.93 earnings per share on $343.1 million in revenue, an 18% increase from the previous quarter and a 35% rise from the same period last year.

The company also raised its guidance for the second half of the year. Other analysts have also shown confidence in Onto Innovation, with Goldman Sachs initiating coverage with a Buy rating and a $400 price target, and Morgan Stanley adjusting its price target to $360 from $383 with an Overweight rating, both citing AI demand as a growth driver for the company's inspection and metrology equipment.