TLDR
- Two analyst firms upgrade Applied Materials with price targets of $340 and $385
- RBC Capital highlights DRAM equipment spending as key growth driver for coming year
- Stock valued at 30x earnings, trading 20% below semiconductor equipment peer group
- Company posts 77% annual return despite China headwinds and mature node weakness
- Applied Materials announces eighth consecutive year of dividend increases at $0.46 quarterly
Applied Materials drew positive attention from Wall Street analysts this week. Two separate firms issued bullish calls on the semiconductor equipment manufacturer.
Stifel lifted its price target to $340 from $250. The firm kept its Buy rating unchanged. RBC Capital started fresh coverage with an Outperform rating and $385 target.
The stock currently trades around $302. These new targets suggest potential upside of 13% to 27% from current levels.
RBC Capital’s Srini Pajjuri emphasized Applied Materials’ positioning in DRAM manufacturing equipment. Spending in this category should outpace the overall wafer fab equipment market over the next 12 months.
Stifel praised the company’s extensive product range. This broad portfolio gives Applied Materials more ways to expand its addressable market than competitors.
The stock climbed 77% over the past year. This gain came even as the company faced challenges from China restrictions and softer mature node spending.
Discount to Peers Attracts Buyers
Applied Materials trades at 30 times earnings. Semiconductor capital equipment peers trade at higher multiples, creating a 20% valuation discount.
RBC Capital views this gap as creating opportunity. The firm believes the risk-reward profile favors buyers at these levels.
Stifel expects the company to achieve higher revenue and profit peaks in the next industry upswing. Applied Materials demonstrated strength during the recent downturn, supporting the case for multiple expansion.
The company rewarded shareholders with its latest dividend news. The $0.46 quarterly payment extends the dividend growth streak to eight years.
Technology Trends Support Growth Case
Several emerging technologies should drive equipment sales. Backside power delivery represents a major manufacturing shift requiring new tools.
Hybrid bonding offers another growth avenue. Advanced 3D transistor designs also create demand for specialized equipment.
Applied Materials’ product breadth allows it to capture spending across these trends. Limited acquisition activity in the sector makes this existing capability more important.
Other Wall Street firms recently updated their views. TD Cowen established a $315 target while KeyBanc Capital Markets set a $285 target.
UBS moved its rating to Buy with a $285 target. The upgrade came on expectations for rising wafer fab equipment demand.
Price targets across the Street range from $190 to $425. The stock trades close to its 52-week high of $310.64.
Applied Materials holds key positions in fast-growing chip manufacturing segments. DRAM memory and advanced foundry production remain core markets.
Wafer fab spending should increase in the coming year. Analysts expect Applied Materials to grow in line with or faster than the overall market.
The company experienced some market share losses last year. China pressures and competitive dynamics played a role in these declines.
Multiple catalysts support the positive analyst outlook. Technology transitions, reasonable valuation, and strong market position drive the bullish thesis.
RBC Capital noted Applied Materials beat the SOX semiconductor index last year. The stock trailed some domestic equipment peers due to geographic exposure and competitive factors.
Stifel pointed to the limited merger environment in semiconductor equipment. This benefits companies like Applied Materials that already possess comprehensive product portfolios.
The company’s technology addresses future chip manufacturing challenges. Analysts see this positioning as valuable heading into the next industry growth phase.
