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On Friday, Wells Fargo adjusted its outlook on Applied Materials (NASDAQ:AMAT), reducing the stock's price target to $260 from $280, but retained an Overweight rating. The firm's decision followed the observation that Applied Materials' guidance for the October quarter slightly fell short of buy-side expectations.
The analyst from Wells Fargo has revised the revenue and EPS estimates for the calendar years 2024, 2025, and 2026. The new estimates are set at $27.78 billion in revenue with $8.72 EPS for 2024, $31.61 billion with $10.33 EPS for 2025, and $33.53 billion with $11.12 EPS for 2026.
These projections are slightly adjusted from the previous figures of $27.70 billion with $8.68 EPS for 2024, $30.98 billion with $10.21 EPS for 2025, and $33.39 billion with $11.09 EPS for 2026.
The adjustment in the price target to $260 was made to align with the valuation of Lam Research (NASDAQ:LRCX) and to reflect the recent market multiple compression. The new target is based on a 25x price-to-earnings (P/E) ratio and a 21x enterprise value to EBITDA (EV/EBITDA) multiple on the firm's 2025 estimates.
Applied Materials has been the focus of several financial reviews and projections. The semiconductor company's third fiscal quarter results surpassed expectations, with revenues of $6.778 billion and an earnings per share (EPS) of $2.12. Morgan Stanley updated its outlook on Applied Materials, raising the stock's price target to $224, while maintaining an Equalweight rating. Goldman Sachs reiterated its Buy rating on the company's stock, anticipating a positive growth trajectory through 2025.
Additionally, Bernstein raised its price target for Applied Materials to $250, maintaining an Outperform rating. Deutsche Bank adjusted its price target for the company to $230, acknowledging the company's robust financial results and a modest increase in revenue and gross margin estimates.
Applied Materials also projected growth for the fourth fiscal quarter due to increased demand in leading-edge Logic/Foundry and High-Bandwidth Memory sectors. Moreover, the company introduced a series of materials engineering innovations and announced a 25% increase in its quarterly cash dividend, raising it from $0.32 to $0.40 per share.
InvestingPro Insights
As investors weigh Wells Fargo's revised outlook on Applied Materials (NASDAQ:AMAT), it's valuable to consider additional real-time data and insights from InvestingPro. The company's market capitalization stands at a robust $175.39 billion, reflecting its significant presence in the industry. Applied Materials is currently trading at a P/E ratio of 24.15, which, while on the higher end, is not unusual for a leading company in the technology sector. Furthermore, the company has demonstrated a strong gross profit margin of 47.18% over the last twelve months as of Q2 2024, indicating efficient operations and a solid grasp on cost management.
Two InvestingPro Tips shed light on recent performance and investor confidence. Firstly, Applied Materials has shown a significant return over the last week, with a 10.8% price total return, highlighting a recent uptick in investor sentiment. Secondly, the company has maintained a consistent dividend payment for 20 consecutive years, with a recent 25% dividend growth, exemplifying its commitment to shareholder returns. These factors, combined with the company's ability to cover its interest payments comfortably, suggest a stable financial position.
For investors seeking a more in-depth analysis, there are 18 additional tips available on InvestingPro, including insights into earnings revisions, debt levels, and valuation multiples, which can be accessed at Investing.com/pro/AMAT. This additional information could provide a more nuanced view of the company's outlook and help investors make more informed decisions.
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