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On Friday, Craig-Hallum analyst Christian Schwab revised the price target for Applied Materials (NASDAQ:AMAT) shares, reducing it to $205 from the previous target of $240, while still recommending the stock as a Buy. With a market capitalization of $143 billion and analyst targets ranging from $164 to $250, InvestingPro data shows the stock is currently trading near its Fair Value. Schwab's reassessment follows Applied Materials' forecast of continued growth in key areas of its business, despite some challenges on the horizon.
The company anticipates sustained demand in leading-edge logic and foundry spending, as well as in high bandwidth memory (HBM), primarily fueled by investments in artificial intelligence (AI). As a prominent player in the Semiconductors & Semiconductor Equipment industry, Applied Materials also expects to capitalize on significant technological shifts, such as the transition to gate-all-around transistors, projecting this segment to double its current value to approximately $5 billion in 2025, up from around $2.5 billion in 2024. The company's strong financial health, evidenced by a robust current ratio of 2.68 and moderate debt levels, positions it well for these growth initiatives.
Moreover, the firm foresees robust performance in advanced packaging, with revenues expected to double from $1.7 billion in the coming years. These advances are part of the company’s strategic positioning to benefit from the next wave of semiconductor technology.
Despite these positive outlooks, Applied Materials is preparing for some headwinds, particularly in its mature node Integrated Circuits, Automotive, Power, and Sensors (ICAPS) business. After two years of strong investments from customers, the company anticipates a slowdown in this area. Additionally, new trade restrictions imposed on China are projected to create a $400 million challenge in fiscal year 2025, predominantly affecting the Services business, as the company faces limitations on servicing certain Chinese customers.
The impact of these restrictions is expected to be felt across Applied Materials' portfolio, but it will be particularly pronounced in the Semiconductor Systems segment. The company is navigating these challenges while continuing to focus on areas of growth and technological innovation. With a healthy gross profit margin of 47.7% and strong return on equity of 35%, the company maintains solid fundamentals. Want deeper insights? InvestingPro offers exclusive access to over 30 additional financial metrics and ProTips, along with comprehensive Pro Research Reports that transform complex Wall Street data into actionable intelligence.
In other recent news, Applied Materials has been the subject of diverse analyst projections. Citi analyst Atif Malik raised the price target for the company to $202, maintaining a Buy rating. Despite a slight variance in revenues and earnings per share, the results outperformed Citi's own projections. Malik anticipates sales in China to represent a smaller percentage of the Wafer Fabrication Equipment (WFE) market by 2025, which could be offset by growth in leading-edge Gate-All-Around (GAA) technology.
On the other hand, Stifel analysts adjusted their outlook on Applied Materials, reducing the price target from $250 to $235, while still maintaining a Buy rating. The firm believes the company is well-positioned to outperform the industry's expected mid-single digit growth in WFE for the calendar year 2025 due to its strategic investments. The new price target is based on a 20 times multiple of the projected calendar year 2026 earnings per share.
Cantor Fitzgerald reiterated its Overweight rating on Applied Materials with a steady price target of $220. The firm anticipates the company to slightly outperform expectations and increase its guidance, propelled by industry trends. These recent developments provide investors with a broad perspective on the company's performance and future potential.
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