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Investing.com - Barclays maintained its Equalweight rating and $170.00 price target on Applied Materials (NASDAQ:AMAT) stock, a prominent player in the semiconductor equipment industry with a market capitalization of $151 billion. According to InvestingPro data, the company maintains strong financial health with a P/E ratio of 22.9x and has consistently paid dividends for 21 consecutive years.
The semiconductor equipment maker faces challenges from capacity digestion in China, with Chinese revenue implied to be down 24% quarter-over-quarter, contributing to an overall 8% sequential decline, according to Barclays. Despite these headwinds, InvestingPro analysis shows the company maintains healthy financials with revenue growth of 6% over the last twelve months and strong cash flows to cover its obligations.
A large backlog of pending export license applications for China revenue represents another concern, with Applied Materials management taking a conservative approach by assuming none will be granted in their guidance.
The third and "most surprising" issue involves non-linear demand from leading edge customers due to increased customer concentration and fab timing, with management removing $500 million of revenue from their forecast without committing to its return in calendar year 2026.
Barclays noted these dynamics, combined with "relatively soft spend" at Intel and Samsung, make "the case for WFE growth in CY26 just got harder," referring to wafer fabrication equipment spending prospects.
In other recent news, Applied Materials Inc. reported better-than-expected earnings for the third quarter of fiscal 2025. The company achieved earnings per share of $2.48, surpassing the forecasted $2.36, and its revenue reached $7.3 billion, exceeding the expected $7.22 billion. Despite these positive financial results, the stock experienced a decline in value during regular and aftermarket trading, indicating mixed market sentiment. In related developments, Goldman Sachs reiterated its Buy rating for Applied Materials with a $215 price target, although it noted potential headwinds due to a $500 million drop in China and delays from certain logic customers. Conversely, Summit Insights downgraded the stock from Buy to Hold, citing concerns over U.S. export restrictions to China and resulting market challenges. These recent developments highlight the complex factors influencing Applied Materials’ current market position.
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