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On Thursday, Morgan Stanley (NYSE:MS) analysts upgraded Applied Materials (NASDAQ: NASDAQ:AMAT) stock from underweight to equalweight. The analysts set a new price target of $158, down from the previous target of $162. According to InvestingPro data, the company maintains a strong "GOOD" financial health rating, with analyst targets ranging from $152 to $250, reflecting diverse market opinions about this semiconductor equipment leader with a $131.7 billion market cap.
The analysts noted that their estimates for Applied Materials are below the market consensus. They stated that the new price target is based on a 17 times multiple of the company’s expected earnings per share (EPS) for the calendar year 2026, which is projected to be $9.31. This multiple aligns with Applied Materials’ historical average but reflects a 20% discount compared to their average target multiples for KLA and LAM. Notably, InvestingPro shows the stock currently trades at a P/E ratio of 19.8x, with 19 analysts recently revising their earnings estimates upward.
The report highlights that the firm’s revenue and EPS estimates for the fiscal year 2026 are 8% and 10% below market expectations, respectively. This outlook is attributed to a more pessimistic view on leading logic and DRAM markets. Despite this, the analysts expressed that further downward revisions would be necessary to see a downside to the stock.
In their analysis, the Morgan Stanley team adjusted their fiscal year 2025 estimates for Applied Materials. They now project revenues of $28.6 billion and an EPS of $9.36. For fiscal year 2026, they revised their estimates to $28.1 billion in revenue and an EPS of $9.04.
In other recent news, Applied Materials has been under the spotlight following its latest financial results and analyst evaluations. The company reported earnings per share (EPS) that exceeded expectations for both the April and July quarters, despite revenue falling slightly short of projections in April. Analysts from Cantor Fitzgerald and Citi maintained their positive outlooks, with Cantor Fitzgerald keeping an Overweight rating and a $200 price target, while Citi raised its target to $190 from $170. Meanwhile, TD Cowen adjusted its price target to $220 from $225, maintaining a Buy rating, citing the company’s strong portfolio and pricing power amidst higher costs.
JPMorgan also revised its price target for Applied Materials to $210 from $240, maintaining an Overweight rating, while noting challenges in mature and specialty segments due to decreased spending in China. Evercore ISI lowered its price target to $209 from $220 but kept an Outperform rating, highlighting the company’s strategic positioning in key growth areas like advanced DRAM and packaging technologies. Applied Materials’ management addressed trade restrictions and tariffs, indicating these are longer-term non-issues due to their global manufacturing footprint.
The company has seen a normalization in its China revenue and remains optimistic about its growth potential in the semiconductor industry. Analysts project continued growth, with some forecasting EPS increases into 2025 and 2026, supported by trends in advanced technologies. These recent developments reflect a complex but promising outlook for Applied Materials as it navigates market challenges and opportunities.
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