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Investing.com - UBS has lowered its price target on Applied Materials (NASDAQ:AMAT) to $180.00 from $185.00 while maintaining a Neutral rating on the semiconductor equipment manufacturer. The company, currently trading at $188.24 with a market capitalization of $151 billion, is a prominent player in the semiconductor industry according to InvestingPro data.
The price target reduction follows what UBS describes as "surprisingly weak" guidance from Applied Materials, which the firm attributes primarily to company-specific challenges rather than industry-wide issues. Despite these challenges, the company maintains strong financial metrics, with a healthy 48% gross margin and a return on equity of 36%.
According to UBS, Applied Materials is experiencing "significant and unique share pressure in China," particularly for large new projects, with domestic Chinese semiconductor equipment suppliers gaining market share in non-critical applications like chemical mechanical planarization (CMP), physical vapor deposition (PVD), and non-critical etch steps.
UBS notes that while Applied Materials had performed well in China over recent years in these non-critical applications, this trend is "now reversing itself in a big way" as evidenced by data showing Applied Materials’ China market share continuing to decline while competitors like Lam Research have seen their China share grow after previously bottoming out.
The firm also mentions that Applied Materials faces some exposure to capital expenditure cuts at Intel, though it considers this impact "more on the margin" compared to the China-related challenges. Based on InvestingPro’s comprehensive analysis, the stock is currently trading near its Fair Value, with 12+ additional ProTips and detailed financial metrics available for subscribers.
In other recent news, Applied Materials reported mixed earnings results, with the company’s earnings per share for the July quarter surpassing consensus estimates by 5%. However, the outlook for the October quarter fell short of expectations, with a forecasted 11% decline due to challenges in China and fluctuations in demand for advanced logic technologies. Needham maintained a Buy rating with a $240 price target despite the earnings miss, while Wolfe Research adjusted its price target to $200, citing a long-term earnings potential of $11 per share. Evercore ISI reiterated its Outperform rating with a $209 price target, acknowledging the earnings beat but noting the weaker forward guidance. Stifel also lowered its price target to $180, maintaining a Buy rating, following the company’s third-quarter results that exceeded estimates but came with a subdued outlook for the fourth quarter. Barclays held an Equalweight rating with a $170 target, highlighting issues such as capacity digestion in China and export license challenges affecting the company’s outlook. These developments reflect ongoing concerns in the semiconductor sector, particularly related to geopolitical and market dynamics in China.
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