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On Friday, Deutsche Bank adjusted its price target for Applied Materials (NASDAQ:AMAT), a leading supplier of semiconductor manufacturing equipment, reducing it to $230 from the previous $260. The firm maintained its Hold rating on the stock.
In their earnings review, Applied Materials was recognized for delivering a solid performance that aligned with expectations, with projections for continued growth into 2025. A significant quarterly decline in China revenues was noted, down by 24%, now representing 32% of total revenues. The fall in China's revenues was attributed to the expected decrease in China DRAM spending to nominal levels, a situation considered to be "healthily de-risked."
Despite the decline in China, the company is seeing an upswing in contributions from high-bandwidth memory (HBM)-related spending, which is expected to drive accelerated growth in 2025. Applied Materials is well-positioned to capitalize on this trend in both the front-end of line (FEOL) and advanced packaging sectors.
The report from Deutsche Bank acknowledged that Applied Materials' financial results were robust, although they might not have met the more optimistic expectations of some investors. The bank's revised revenue and gross margin estimates for Applied Materials showed a modest increase. However, this was counterbalanced by a higher projected tax rate and slightly increased operating expenses, leaving the forward earnings per share estimates relatively stable.
Reflecting broader market trends, Deutsche Bank has revised its target price-to-earnings (P/E) multiple for Applied Materials down by approximately three turns to 24 times. This adjustment is in line with the multiple reductions seen across the sector during this earnings season. Consequently, the new price target of $230 is based on 24 times the forecasted CY25 earnings per share.
In other recent news, Applied Materials has been the focus of several recent developments. The firm's October quarter revenue guidance stands at $6.93 billion, signaling a 2.2% quarter-over-quarter and 3% year-over-year growth. Evercore ISI maintains a positive outlook on the company, keeping an Outperform rating with a price target of $260.00. The company also reported an earnings per share (EPS) of $2.18, surpassing the consensus by $0.04 or 1.7%.
Meanwhile, Citi has maintained its Buy rating on Applied Materials, with a price target of $240, expressing confidence in the company's strong quarter report and promising October-quarter EPS guidance. Cantor Fitzgerald, on the other hand, adjusted the price target for Applied Materials shares to $250 from a previous $290, while maintaining the Overweight rating, amid expectations of a modest beat in the company's upcoming report.
In addition, Applied Materials has introduced a series of materials engineering innovations aimed at improving the performance-per-watt of computer systems. Despite scrutiny from the U.S. Department of Commerce regarding its shipments to China, the company announced a 25% increase in its quarterly cash dividend, raising it from $0.32 to $0.40 per share.
These are some of the recent developments involving Applied Materials.
InvestingPro Insights
As we consider the recent adjustments to Applied Materials' (NASDAQ:AMAT) price target by Deutsche Bank, it's valuable to look at some real-time data and insights from InvestingPro. Applied Materials has shown resilience with a market capitalization of $175.39 billion, which reflects its substantial presence in the semiconductor industry. The company's P/E ratio stands at 24.15, which is slightly below the revised target multiple of 24 times CY25 earnings per share. This alignment suggests that the market is pricing the stock in accordance with Deutsche Bank's valuation.
InvestingPro data also reveals a gross profit margin of 47.18% over the last twelve months, indicating the company's efficiency in managing its production costs relative to its revenues. Furthermore, the company has demonstrated a return on assets of 23.93% during the same period, underscoring its ability to utilize its asset base effectively to generate profits.
InvestingPro Tips highlight that Applied Materials has raised its dividend for 6 consecutive years and has maintained dividend payments for 20 consecutive years, reflecting a strong commitment to shareholder returns. Additionally, 18 analysts have revised their earnings upwards for the upcoming period, suggesting a positive outlook on the company's financial performance. For investors looking for more detailed analysis, InvestingPro offers additional tips, with a total of 18 tips available for Applied Materials on their platform.
Overall, these metrics and insights from InvestingPro, combined with the analysis provided by Deutsche Bank, offer investors a comprehensive view of Applied Materials' current financial health and future potential.
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