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Investing.com - {{6386|{{6386|{{6386|{{6386|{{6386|{{6386|{{6386|Applied Materials}}}}}}}}}}}} (NASDAQ:AMAT)}}, a prominent player in the semiconductor equipment industry with a market capitalization of $151 billion, received a reiterated Buy rating and $240 price target from Needham on Friday, despite the company reporting an unexpected earnings miss. According to InvestingPro data, the company maintains a "GOOD" financial health score, with analyst targets ranging from $165 to $250.
The semiconductor equipment maker’s disappointing results were primarily attributed to increased weakness in China and softness in leading-edge logic demand as the company approaches its fiscal year end in October. Despite these challenges, Applied Materials has maintained strong fundamentals, with revenue growing at 6% year-over-year and a healthy P/E ratio of 23.
Needham noted that Applied Materials has reduced its fiscal year 2025 Gate-All-Around (GAA) revenue outlook from $5 billion to $4.5 billion, representing a significant $500 million reduction, though the company did not specify which customers were responsible for the adjustment.
Looking ahead to fiscal year 2026, Applied Materials management remains optimistic about DRAM prospects, even after approximately 50% year-over-year growth in non-China DRAM business during fiscal year 2025, but expressed concerns about continued weakness in China that could persist for "several quarters."
Needham has reset its fiscal year 2026 estimates lower but recommends investors buy Applied Materials shares on the current weakness.
In other recent news, Applied Materials has reported earnings per share for the July quarter that exceeded consensus estimates by 5%. However, the company’s earnings outlook for the October quarter is 11% below expectations due to challenges in China and variability in leading-edge foundry and logic revenues. Stifel has lowered its price target for Applied Materials to $180 from $195, citing the company’s fiscal third-quarter results that surpassed estimates but included a weaker-than-expected forecast for the fiscal fourth quarter.
Wolfe Research has also adjusted its price target for the company, reducing it from $230 to $200, while maintaining an Outperform rating. Evercore ISI reiterated its Outperform rating with a price target of $209, despite the company’s challenges. Barclays maintained its Equalweight rating with a $170 price target, highlighting issues such as capacity digestion in China and a significant sequential decline in Chinese revenue. Meanwhile, Goldman Sachs reiterated a Buy rating and a $215 price target, acknowledging weak guidance due to a $500 million drop in China and additional delays from select logic customers. These developments reflect the mixed outlook and ongoing challenges faced by Applied Materials.
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