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On Monday, Applied Materials (NASDAQ:AMAT) shares had its price target adjusted by Cantor Fitzgerald, dropping to $250 from the previous target of $290, while the Overweight rating on the stock was reaffirmed.
The adjustment comes amid expectations of a modest beat and raise in the company's upcoming report, which is anticipated to alleviate concerns regarding the wafer fabrication equipment (WFE) market following Intel (NASDAQ:INTC)'s updates.
Applied Materials is projected to offset a sequential decline in domestic China DRAM with gains in ICAPS and leading-edge Foundry/Logic, coupled with continued strength from HBM DRAM.
This is expected to contribute to mid-single-digit growth in Silicon revenue on a half-yearly basis. For the second half of 2024, the focus is likely to shift towards TSMC and ICAP (LON:NXGN) rather than Intel, a sentiment supported by recent statements from Tokyo Electron.
Looking ahead, Applied Materials is expected to outline 2024 as a year of growth for Silicon, with even more significant expansion anticipated for 2025.
The company is set to highlight increased spending from TSMC, consistent investment in DRAM, particularly HBM, a modest NAND recovery, and continuous spending from domestic China.
From a product standpoint, the emphasis will be on technologies such as GAA, HBM, Backside Power, and Advanced Packaging (NYSE:PKG), with expectations for a growing share of WFE and an increase in the share of wallet in incremental spending areas.
Additionally, Applied Materials is predicted to reiterate low-double-digit growth for its AGS segment as utilization rates improve, while the Display segment is expected to continue its current performance.
The company is also likely to discuss current normalized margins and provide insights into achieving its target margin range of 48.0-48.5% for FY25.
The forecasted CY24E EPS for Applied Materials stands at approximately $8.63, compared to the consensus of $8.52, and has the potential to reach around $8.75.
For CY25E, the firm continues to model $10.15, surpassing the consensus of $9.81, and sees a possible path to $11 or more. Despite the re-rating in the semiconductor sector and the broader market, Cantor Fitzgerald maintains an Overweight rating on the stock, citing over 30% upside potential based on the newly set price target.
InvestingPro Insights
As Applied Materials (NASDAQ:AMAT) navigates the landscape of the semiconductor industry, the company's financial health and market performance offer key insights for investors. According to InvestingPro data, Applied Materials boasts a solid market capitalization of $158.29 billion and maintains an attractive P/E ratio of 22.04, indicating investor confidence in its earnings potential. The company's commitment to shareholder returns is evident with a dividend growth of 25.0% over the last twelve months as of Q2 2024, highlighting its financial stability and dedication to consistent dividend payments for over 20 years.
InvestingPro Tips further enrich the outlook for Applied Materials, revealing that 18 analysts have revised their earnings upwards for the upcoming period, suggesting optimism about the company's future performance. Additionally, Applied Materials is recognized as a prominent player in the Semiconductors & Semiconductor Equipment industry, which is crucial given the company's strategic focus on leading-edge technologies and incremental spending areas highlighted in the article.
Investors seeking a more comprehensive analysis can find an array of additional InvestingPro Tips on https://www.investing.com/pro/AMAT, which provide deeper insights into Applied Materials' financial health and market position.
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