EU and US could reach trade deal this weekend - Reuters
On Friday, Citi analyst Atif Malik increased the price target for Applied Materials (NASDAQ:AMAT) shares to $202 from the previous $194, while reiterating a Buy rating on the stock. Currently trading at $184.27 with a P/E ratio of 21.13x, Applied Materials has established itself as a prominent player in the Semiconductors & Semiconductor Equipment industry, according to InvestingPro data. Malik's assessment followed Applied Materials' financial results, which showed a slight variance from Wall Street expectations, with revenues and earnings per share (EPS) down 2% and up 0.3% respectively. Despite these figures, the results were more favorable than Citi's own projections.
The analyst noted that sales in China are anticipated to represent a smaller percentage of the Wafer Fabrication Equipment (WFE) market by 2025, with the April quarter potentially seeing a 5% decrease, falling beneath the usual 30% level. Management's commentary was seen as mitigating risks associated with China, aligning with the sentiment towards industry peers. With annual revenue of $27.18 billion and a robust EBITDA of $8.26 billion, Applied Materials maintains a strong financial position. Malik pointed out that Applied Materials is encountering challenging comparisons in the first half of the year compared to its peers due to a lower mix of DRAM, ICAPS, and Advanced Packaging (NYSE:PKG). However, this is expected to be partially offset by growth in leading-edge Gate-All-Around (GAA) technology, with comparisons improving in the second half of the year.
The report also mentioned that service sales are likely to slow down, mirroring the trend among peers, due to the impact of China's 200mm equipment contribution in fiscal year 2025. Nevertheless, a return to low double-digit growth is forecasted for fiscal year 2026. Based on these insights, Citi has adjusted its EPS estimates for calendar years 2025 and 2026 upwards by 2%.
In conclusion, Malik's revised price target of $202 is grounded in a consistent 23x price-to-earnings (P/E) ratio applied to the company's projected 2026 earnings, with the figure discounted back to the present. The analyst maintains a positive outlook on the Semiconductor Capital Equipment (SCE) group, advocating for purchasing on pullbacks across the sector, as outlined in Citi's 2025 playbook.
In other recent news, Applied Materials has been the subject of several analyst adjustments. Stifel recently cut the semiconductor equipment maker's price target from $250 to $235, maintaining a Buy rating. The firm's analysts project the company to outperform the industry's expected mid-single digit growth in wafer fabrication equipment for 2025, citing strategic investments. Meanwhile, Cantor Fitzgerald maintained a steady price target of $220 on Applied Materials stock, anticipating the company to slightly outperform expectations and increase its guidance due to industry trends.
In contrast, Deutsche Bank (ETR:DBKGn) reduced the price target for Applied Materials to $170 from $200, maintaining a Hold rating due to anticipated volatility in the wafer fabrication equipment market. Despite these adjustments, Applied Materials remains a significant player in the semiconductor industry, with recent developments indicating a positive outlook for the sector.
In other related news, shares of semiconductor equipment manufacturers, including Applied Materials, saw gains following robust earnings reports from sector peers ASML (AS:ASML) and TSMC. ASML's impressive fourth-quarter results for 2024 surpassed expectations, providing a positive outlook for the semiconductor equipment sector. TSMC also announced a capital expenditure target for the year that surpassed analysts' expectations, signaling a potentially lucrative year for the semiconductor industry.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.