Applied Materials stock downgraded by Daiwa as semiconductor demand slows

Investing.com - Applied Materials (NASDAQ:AMAT) stock rating was downgraded by Daiwa Securities from Outperform to Neutral, with its price target reduced to $170 from $185. The $130 billion semiconductor equipment maker has seen its shares decline nearly 15% in the past week, with InvestingPro data showing the stock’s RSI entering oversold territory.

The downgrade follows quarterly results that fell below the research firm’s expectations, with Daiwa citing weak trends in semiconductor equipment spending due to issues at major customers Intel (NASDAQ:INTC) and Samsung (KS:005930), along with sluggish semiconductor demand outside of AI applications. Despite market challenges, InvestingPro analysis indicates Applied Materials maintains strong financial health with a current ratio of 2.5x and moderate debt levels.

Daiwa indicated it would maintain a Neutral stance while waiting for signs of a rebound in the semiconductor equipment market, noting that improvement could take time.

The firm lowered its price target to reflect reduced expectations, though it still values Applied Materials at 18 times its lowered fiscal year 2026 earnings per share estimate.

Applied Materials shares are currently trading in line with their five-year average price-to-earnings ratio of 17 times earnings, according to Daiwa’s analysis.

In other recent news, Applied Materials reported fiscal third-quarter results that exceeded expectations, with revenue of $7.302 billion and earnings per share of $2.48, surpassing analyst estimates of $7.215 billion in revenue and $2.36 in earnings per share. However, the company provided guidance for the October quarter that fell short of consensus estimates, projecting $6.70 billion in revenue and $2.11 in earnings per share, compared to expectations of $7.32 billion and $2.38, respectively. This weaker-than-expected guidance has led several analysts to adjust their price targets for the company.

Bernstein SocGen Group lowered its price target to $195 from $210, maintaining an Outperform rating due to uncertainty about future wafer fabrication equipment spending. CFRA reduced its price target to $167 from $175, citing trade uncertainties affecting near-term demand, while also adjusting its earnings estimates for fiscal years 2025 and 2026. Cantor Fitzgerald and Mizuho (NYSE:MFG) both lowered their price targets to $200, citing disappointing guidance and specific challenges related to China and technology ramp delays. UBS also lowered its price target to $180, attributing the reduction to surprisingly weak guidance and company-specific challenges. These recent developments reflect a cautious outlook from analysts despite the company’s strong third-quarter performance.

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