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On Friday, JPMorgan analyst Harlan Sur adjusted the price target for Applied Materials (NASDAQ:AMAT) stock, reducing it to $210 from $240, while maintaining an Overweight rating on the shares. The revision follows Applied Materials’ announcement of its April-quarter financial performance and future outlook. The company, currently valued at $142 billion, remains a prominent player in the Semiconductors & Semiconductor Equipment industry according to InvestingPro analysis, which indicates the stock is trading near its Fair Value.
The company reported revenue for the April quarter that met expectations, with better gross margins and a slightly improved earnings per share (EPS). With trailing twelve-month revenue of $28.09 billion and an impressive gross margin of 48.14%, Applied Materials demonstrates strong operational efficiency. Looking ahead, Applied Materials offered an outlook for the July quarter that aligns with consensus estimates regarding revenue and gross margins, and anticipates a slightly higher EPS. This outlook is supported by robust expenditure trends in advanced foundry, logic, and DRAM sectors, as well as technology shifts in NAND production. InvestingPro subscribers have access to 14 additional key insights about Applied Materials, including detailed analysis of its financial health and growth prospects.
Sur highlighted several growth drivers for Applied Materials, including technology advancements in foundry and logic at the 2nm scale, transitions and new architectures in DRAM such as DDR5 and HBM, conversions to 200+ layer NAND technology, and ongoing progress in advanced packaging and HBM. The company’s strong financial position is evident in its healthy current ratio of 2.46 and moderate debt levels. However, the company is experiencing headwinds due to decreased spending on mature technologies, particularly in China, where spending dropped by 21% quarter-over-quarter in the April quarter.
The mature and specialty segments of the business, particularly the ICAPS division, are facing challenges. This segment represents about half of the company’s foundry and logic systems segment and is significantly impacted by weak demand in mature/specialty markets, which negatively affects growth when compared to peers.
Sur also noted that the company is not observing any significant changes in customer forecasts or any demand being pulled forward due to trade or tariff-related dynamics. Despite the in-line financial results and guidance, JPMorgan has revised its revenue and EPS estimates for fiscal and calendar year 2025 downward, attributing the adjustment to a projected weaker demand in the second half of the year, influenced by tariff and trade issues affecting the broader semiconductor and semiconductor capital equipment industry.
In other recent news, Applied Materials has seen several adjustments to its price targets from various analysts following its recent earnings report. Evercore ISI lowered its target to $209, maintaining an Outperform rating and noting the company’s strategic positioning in the semiconductor industry. Raymond (NSE:RYMD) James also cut its target to $200, highlighting that while the company’s revenue and earnings per share met expectations, the ICAPS segment showed unexpected weakness. BofA Securities took a different stance, raising its target to $190, citing better-than-expected earnings per share due to strong margins, despite challenges in the trailing-edge market.
Morgan Stanley (NYSE:MS) reduced its price target to $162, maintaining an Underweight rating, and noted that Applied Materials’ performance aligned closely with its projections, lacking the upside seen in peers. Barclays (LON:BARC), on the other hand, increased its target to $160 while keeping an Equalweight rating, acknowledging the challenges in the China market but expecting improvements in upcoming quarters. Analysts have noted the robust demand in sectors such as DRAM and artificial intelligence-related technologies, which are expected to drive growth despite current market challenges.
These recent developments reflect the varied perspectives on Applied Materials’ potential, with analysts weighing the company’s strategic strengths against industry headwinds.
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