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Investing.com -- Daiwa Capital Markets downgraded Applied Materials (NASDAQ:AMAT) to Neutral from Outperform and lowered its price target to $170 from $185, saying China demand has cooled faster than expected and guidance for the current quarter fell well below Wall Street estimates.
The firm said Applied delivered a solid third quarter, but the company’s revenue forecast of $6.7 billion for the October quarter, plus or minus $500 million, was about $631 million below consensus, while the midpoint of its EPS outlook of $2.11 was nearly 30 cents under analyst expectations.
Daiwa cited three main concerns: delays in securing export licenses for China, which could take several quarters to normalize even if approval comes; heavy Chinese buying in the last two years that now needs to be absorbed; and softer-than-expected demand for leading-edge chip equipment due to spending pullbacks by Intel (NASDAQ:INTC) and Samsung (KS:005930).
It expects China to remain a drag in the near term, cutting roughly $500 million in sales quarter over quarter, while leading-edge demand could stay volatile until AI-driven spending picks up more meaningfully.
Positives remain, including strong DRAM demand, growth in display equipment and the longer-term transition to gate-all-around (GAA) technology.
But Daiwa trimmed its revenue and earnings estimates for fiscal 2025 and 2026 and warned that a rebound will take time.
“While downgrading on a miss is not good, and valuation is more modest …we wait for the signs of rebound and these issues could take time to improve,” the analysts wrote, noting shares already trade around their five-year average valuation.