Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

Applied Materials stock rated Hold by Deutsche Bank, facing a choppy market outlook

EditorAhmed Abdulazez Abdulkadir
Published 16/12/2024, 09:00 pm
© Pavlo Gonchar / SOPA Images/Sipa via Reuters Connect

© Pavlo Gonchar / SOPA Images/Sipa via Reuters Connect

AMAT
1.33%

On Monday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on Applied Materials (NASDAQ:AMAT), reducing the price target to $170 from the previous $200, while maintaining a Hold rating on the stock. Currently trading at $169.35, Applied Materials has seen significant volatility, with a 28% decline over the past six months. The revision follows a reassessment of the wafer fabrication equipment (WFE) market dynamics, which are anticipated to be volatile into 2025. According to InvestingPro data, the company maintains a "GOOD" overall financial health score despite market challenges.

The bank's analyst noted that the WFE environment experienced a mixed performance in 2024 and is expected to continue facing challenges. The updated forecast for the calendar year 2025 (CY25E) WFE now suggests a flat year-over-year performance, a revision from the previously expected 5% growth. The change reflects various industry factors, with a majority posing negative impacts. Despite these challenges, 14 analysts have revised their earnings upwards for the upcoming period, as revealed by InvestingPro's analysis.

The analyst highlighted the uncertainty within the semiconductor capital equipment sector, indicating a wide range of potential outcomes for CY26E WFE, estimated between $94 billion and $117 billion. This variability emphasizes the importance of careful selection when investing in this sector, given the difficulty in assessing risk/reward profiles in the current cycle.

Aligned with the revised WFE outlook, Deutsche Bank has also adjusted its company-specific forecasts for Applied Materials and its peers. Revenue estimates for Applied Materials, KLA Corporation (KLAC), and Lam Research Corporation (NASDAQ:LRCX) are now approximately 2-5% below the consensus on the street. The valuation methodologies have been updated to base on CY26E earnings per share (EPS), rather than CY25E EPS.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.

While the bank continues to prefer KLA Corporation, which holds a Buy rating and a price target of $725, it maintains Hold ratings on Applied Materials and Lam Research until there is greater clarity on the timing and magnitude of a broader cyclical recovery in the sector. With a P/E ratio of 19.67 and strong profitability metrics, including a 47.46% gross margin, Applied Materials presents an interesting case for investors. For deeper insights into Applied Materials' valuation and growth prospects, including additional ProTips and comprehensive analysis, check out the full research report available on InvestingPro.

In other recent news, KLA Corporation's target price was reduced to $725 from the previous $750 by Deutsche Bank, though the firm maintained a Buy rating on the company. This adjustment reflects a more cautious outlook for the Wafer Fabrication Equipment (WFE) market extending into 2025. Despite the downward revisions, Deutsche Bank continues to favor KLA Corporation within the U.S. semiconductor capital equipment sector due to its perceived resilience in a challenging market.

Morgan Stanley (NYSE:MS) adjusted its stance on Applied Materials, downgrading the company's stock rating from Equalweight to Underweight and revised its price target downwards to $164 from the previous $179. This downgrade reflects concerns over the near-term operating environment for Applied Materials' key end-markets. Despite these concerns, the company is expected to see robust growth throughout 2023-24.

Applied Materials maintained its business outlook for the first quarter of fiscal 2025, despite new semiconductor technology export regulations. This sentiment is supported by 14 analysts who have recently revised their earnings expectations upward. The company's recent financial results indicate an annual revenue of $27.2 billion, with non-GAAP earnings per share rising by 7.5% to $8.65.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.

TD Cowen adjusted its outlook on Applied Materials, reducing the price target to $230 from $250, while maintaining a Buy rating on the shares. The firm's analyst cited a mix of operational strengths and market challenges influencing this decision. Despite these challenges, the analyst remains positive on Applied Materials' prospects.

Lastly, Wolfe Research adjusted its outlook on Applied Materials, reducing the stock's price target from $260 to $230, while continuing to recommend the stock as Outperform. This revision reflects a reevaluation based on recent earnings estimates adjustments. Despite this reduction, Wolfe Research maintains a positive view on the company's prospects.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Should you invest $2,000 in AMAT right now?

With AMAT making headlines, savvy investors are asking: Is it truly valued fairly? In a market full of overpriced darlings, identifying true value can be challenging. InvestingPro's advanced AI algorithms have analyzed AMAT alongside thousands of other stocks to uncover hidden gems. These undervalued stocks, potentially including AMAT, could offer substantial returns as the market corrects. In 2024 alone, our AI identified several undervalued stocks that later surged by 30 or more. Is AMAT poised for similar growth? Don't miss the opportunity to find out.

Reveal Undervalued Stocks Now

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.