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On Friday, Evercore ISI made an adjustment to the price target of Applied Materials (NASDAQ:AMAT) stock, reducing it from $220.00 to $209.00. Despite the cut in price target, the firm maintained its Outperform rating on the company’s shares. The stock, currently trading at $174.75, has shown remarkable strength with a 12.3% return over the past week. According to InvestingPro data, the stock’s RSI suggests it’s in overbought territory, which investors should consider in their decision-making.
The reduction in price target reflects a valuation based on 20 times the estimated earnings per share (EPS) for the year 2027, which is projected to be $13.00. This figure has been discounted back to the year 2025. Evercore ISI’s analysts highlight that the current trading price of Applied Materials presents an attractive risk/reward scenario, as the stock is trading at an 18% discount compared to its peer Lam Research Corporation (NASDAQ:LRCX) on a next twelve months (NTM) price-to-earnings (P/E) basis. The company maintains a strong financial position with a current ratio of 2.46 and operates with a moderate debt level, as revealed by InvestingPro analysis, which shows 14 additional key financial insights available to subscribers. This is notably lower than the historical 24% lows observed over the past decade.
According to Evercore ISI, Applied Materials is favorably positioned to surpass the whole wafer fabrication equipment (WFE) industry in the coming years. The firm’s optimism is based on Applied Materials’ involvement in key secular trends such as Gate-All-Around (GAA) transistors, Backside Power delivery, High Bandwidth (NASDAQ:BAND) Memory (HBM), advanced Dynamic Random-Access Memory (DRAM), and advanced packaging technologies.
The analysts at Evercore ISI emphasize that Applied Materials’ exposure to these critical growth areas is a strong indicator of its potential to perform well in the future. The company’s strategic positioning within the semiconductor industry, which is experiencing rapid technological advancements, is expected to contribute to its performance.
This price target adjustment comes as the semiconductor industry continues to evolve with increasing demand for sophisticated technologies. Applied Materials, being a leading provider of equipment, services, and software to the semiconductor industry, is at the forefront of these developments. Based on InvestingPro’s Fair Value analysis, the stock is currently trading near its Fair Value, with a robust financial health score of "GOOD" and impressive profitability metrics, including a 48.14% gross profit margin. For deeper insights into Applied Materials’ valuation and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Applied Materials reported its financial results for the second quarter of fiscal year 2025, with a non-GAAP earnings per share (EPS) of $2.39, surpassing the forecast of $2.31. However, the company’s revenue slightly missed expectations, coming in at $7.1 billion compared to the anticipated $7.12 billion. Analyst firms have adjusted their price targets for Applied Materials following the earnings announcement. Raymond (NSE:RYMD) James reduced its price target to $200 while maintaining an Outperform rating, citing the alignment of revenue and third-quarter outlook with consensus expectations. BofA Securities raised its price target to $190, maintaining a Buy rating, and noted a 4% higher EPS than Wall Street expectations. Morgan Stanley (NYSE:MS) lowered its target to $162, keeping an Underweight rating, highlighting the lack of significant surprises in the quarterly figures. Barclays (LON:BARC) increased its target to $160, acknowledging challenges in the China market but expecting the company to overcome the effects of export controls. These developments reflect varied perspectives on Applied Materials’ performance and future prospects.
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