Citi raises Applied Materials target to $190 from $170

On Friday, Citi analyst Atif Malik increased the price target on Applied Materials shares (NASDAQ:AMAT) to $190 from $170 while reiterating a Buy rating on the stock. The $142 billion market cap semiconductor equipment maker, currently trading at $174.75, has shown strong momentum with a 12.3% return over the past week. Malik’s adjustment follows Applied Materials’ recent financial report, which showed revenue figures for April and July largely in line with Wall Street expectations. The company also reported earnings per share (EPS) that were 3% and 2% higher than anticipated, supported by a favorable product and display gross margin mix of 48.1%.According to InvestingPro, the company maintains a "GOOD" overall financial health score, with particularly strong marks in profitability metrics.

For the July quarter, Applied Materials anticipates a year-over-year increase in leading-edge foundry and logic (F/L) revenue, which is expected to counterbalance weaker areas such as ICAPS. The company also projects stable DRAM revenue, bolstered by advanced DRAM, following a decline in the first two fiscal quarters. Additionally, growth in NAND is foreseen due to upgrades, with the trend likely to persist. The company’s strong market position is reflected in its impressive return on equity of 36% and return on invested capital of 29%.

Applied Materials’ guidance suggests a slight 1% quarter-over-quarter decrease in the July quarter for its Applied Global Services (AGS) division. This is due to the growth in core services, which is set to be partially offset by softness in the China 200mm segment. Nevertheless, management anticipates core services to grow at a low double-digit rate, with the total AGS segment expected to expand by 2025. China is projected to account for approximately 25% of the company’s total semiconductor and AGS revenue.

Malik has updated the earnings per share estimates for calendar years 2025 and 2026 to $9.14 and $9.95, respectively, and has set the new price target based on a consistent 19 times price-to-earnings (P/E) ratio applied to the revised CY26 EPS estimate. The Buy rating has been maintained, reflecting Citi’s continued positive outlook on Applied Materials’ stock.

In other recent news, Applied Materials reported revenue for the April quarter that met expectations, with improved gross margins and a slightly better earnings per share (EPS). The company also provided an outlook for the July quarter that aligns with consensus estimates, anticipating a slightly higher EPS. Analysts from JPMorgan, Evercore ISI, Raymond (NSE:RYMD) James, and BofA Securities have made adjustments to their price targets for Applied Materials, reflecting various factors such as market conditions and financial performance. JPMorgan reduced its target to $210, maintaining an Overweight rating, while Evercore ISI lowered its target to $209, keeping an Outperform rating. Raymond James adjusted its target to $200, also maintaining an Outperform rating, and BofA Securities increased its target to $190, reaffirming a Buy rating. Meanwhile, Morgan Stanley (NYSE:MS) cut its price target to $162, maintaining an Underweight rating, noting that Applied Materials’ performance aligned closely with its projections. The analysts highlighted Applied Materials’ exposure to critical growth areas like advanced DRAM, HBM, and new technologies such as 2nm gate all around, which are expected to drive future performance. Despite challenges in the ICAPS segment and export restrictions, Applied Materials remains focused on key secular trends and efficient margin execution.

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