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On Friday, Barclays (LON:BARC) analyst Tom O’Malley updated the firm’s outlook on Applied Materials (NASDAQ:AMAT), raising the price target to $160.00. The Equalweight rating on the company’s stock remains unchanged. The revision follows the company’s latest earnings report, which indicated a performance slightly below expectations. According to InvestingPro data, the stock has shown remarkable strength with a 12.3% return over the past week, though current trading levels suggest the stock is near its Fair Value. Applied Materials experienced a decline in its ICAPS and China segments, with a 21% sequential drop in China attributed to current market conditions.
O’Malley’s analysis acknowledges the challenges faced by Applied Materials, particularly in the China market where export controls have had an impact. However, he notes that the company is expected to overcome the most significant effects of these controls in the upcoming quarters. The analyst pointed out that Applied Materials has a flexible, global manufacturing strategy that helps mitigate potential costs from tariffs and geopolitical tensions.
Despite these hurdles, the company is witnessing strong order patterns from trailing edge customers in China. O’Malley remarked on the underperformance of the Applied Global Services (AGS) division, where growth in the core segment is being counterbalanced by weak sales of 200mm equipment. This has led to the total AGS segment falling short of the long-term differential deposition (LDD) target.
In conclusion, O’Malley adjusted his forecasts slightly but opted to maintain a cautious stance. He anticipates that Applied Materials may grow at a slower pace compared to its peers this year. This forecast is based on the company’s significant exposure to the trailing edge market, which is currently facing particular weakness. InvestingPro analysis reveals that the company maintains a strong financial health score and has consistently raised dividends for 7 consecutive years. For deeper insights into Applied Materials’ valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which covers over 1,400 top US stocks.
In other recent news, Applied Materials Inc. reported its financial results for the second quarter of fiscal year 2025, achieving a record non-GAAP earnings per share (EPS) of $2.39, which exceeded analyst expectations of $2.31. However, the company’s revenue slightly missed forecasts, coming in at $7.1 billion compared to the anticipated $7.12 billion. Despite the earnings beat, the company experienced a decline in stock value, which analysts attribute to the revenue shortfall and broader market conditions. Applied Materials also announced projections for the third quarter of fiscal year 2025, with expected revenue of $7.2 billion and non-GAAP EPS guidance of $2.35, indicating potential growth in leading-edge foundry logic investments. Additionally, the company is focused on AI-enabling semiconductor technologies, which CEO Gary Dickerson describes as transformative with limitless potential use cases. The company is also facing challenges such as trade restrictions impacting its China business and competition within the semiconductor industry. Despite these challenges, Applied Materials remains committed to innovation and growth, with plans to continue expanding its technological capabilities and market presence.
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