Applied Materials Inc AMAT shares are trading higher Friday after the company reported better-than-expected financial results yesterday. Also, several analysts raised the price targets.
Strong Earnings Performance
Yesterday, Applied Materials reported first-quarter FY24 earnings of $2.13 per share, beating the analyst consensus estimate of $1.91, and sales of $6.71 billion, beating the analyst consensus estimate of $6.48 billion.
Applied Materials sees second-quarter adjusted earnings per share of between $1.79 and $2.15, versus the $1.79 estimate, and second-quarter revenue of between $6.1 billion and $6.9 billion, versus the $6.3 billion estimate.
Analysts’ Bullish Outlook
Maintaining a Buy rating, B.Riley Securities increased the price target to $250 (from $220), Stifel to $230 (from $175), Needham to $240 (from $180), Mizuho Securities to $225 (from $185), Goldman Sachs to $220 (from $156) and BofA Securities to $222 (from $185).
BofA Securities analyst Vivek Arya says Applied Materials is well leveraged across multiple technology enablers of AI silicon, including high-bandwidth memory, advanced packaging, and leading-edge logic.
Also, B.Riley analyst Craig A. Ellis sees better-than-expected new product SAM expansion, multi-segment sales growth, material gross margin and operating margin expansion, and EPS-accretive cash redeployment as tailwinds. Ellis expects a gradual industry recovery to gain steam through 2024 and accelerate in 2025 and estimates EPS of $8.47 in FY24 and $9.09 in FY25.
Industry Leadership and Growth Potential
Moreover, Stifel analyst Brian Chin says Applied has a broader product portfolio to address semi-customers’ future technology roadmap scaling/integration challenges and has more pathways to SAM expansion/solutions engineering than many of its peers. The analyst expects EPS of $8.04 in FY24 and $10.32 in FY25.
Mizuho analyst Vijay Rakesh sees Applied as the top global semi cap equipment supplier, benefiting from HBM ramps and strong leading-edge foundry logic. The analyst raised EPS estimates to $1.97 (cons. $1.79) from $1.88 for the April quarter, $7.92 (vs. cons. $7.76) from $7.90 in FY24, and lowered to $8.94 (cons. $8.99) from $9.02 for FY25.
Goldman Sachs analyst Toshiya Hari expects Applied’s scale and broad portfolio to support cross-cycle share gains, margin expansion, and above-average earnings growth going forward.
Resilience and Future Commitment
However, the analyst expects the Wafer Fab Equipment market backdrop to remain mixed with weakness across trailing-edge process nodes projected to largely offset incremental strength in DRAM and Logic/Foundry business. Nevertheless, Hari raised operating EPS estimates by 11% to $8.02 for FY24 and 12% to $10.45 for FY25.
Needham analyst Charles Shi says Applied’s share gains in DRAM over the past years and potential share gains in leading-edge foundry/logic over the coming years could mean what the company gained over the past cycle is here to stay.
High Praise from Analysts
J. P. Morgan analyst Harlan Sur boosted the price target to $230 (from $170) and reaffirmed an Overweight rating. The analyst expects Applied Materials to continue to benefit from healthy foundry/logic/DRAM exposure and market share gains over the mid-term, allowing it to outpace WFE trends. The analyst expects EPS of $8.40 in FY24.
Meanwhile, KeyBanc analyst Steve Barger maintain the Sector Weight rating and increased estimates to reflect expectations for cyclical improvement. The analyst raised the FY24 EPS estimate to $8.81 from $7.39 (consensus $7.73) and FY25 estimate to $10.26 from $8.37 (consensus $9.03), reflecting 11% revenue growth (7% prior) at 41% incremental (42% prior).
Also, Raymond James raised the price target to $225 (from $180) and reiterated the Outperform rating, and Susquehanna upped the target to $160 ($138) and kept the Neutral rating.
Market Performance
Price Action: AMAT shares are up 7.95% at $202.57 on the last check Friday.
