On Friday, Cantor Fitzgerald reiterated its Overweight rating and $200.00 price target for Applied Materials stock (NASDAQ:AMAT), following a mixed financial performance report. The firm’s analyst highlighted that while Applied Materials’ earnings per share (EPS) exceeded consensus estimates for the April quarter at $2.39 compared to the expected $2.31, and for the July quarter at $2.35 versus $2.31, revenue fell slightly short in April at $7.10 billion against a $7.13 billion consensus. Revenue for July was in line with expectations at $7.2 billion. According to InvestingPro data, the company currently trades at a P/E ratio of 22.68x and maintains a robust gross profit margin of 48.14%.
Management at Applied Materials addressed the recent performance, noting that the World Foundry Equipment (WFE) outlook remains generally unchanged. The company has seen its domestic China revenue normalize at a mid-20s percentage following trade restrictions, and management considers tariffs a longer-term non-issue due to Applied Materials’ global manufacturing footprint. Despite the modest revenue miss, management highlighted strong gross margins, controlled operating expenses, and aggressive share buybacks, with $1.7 billion in shares repurchased in the quarter and a remaining authorization of $15.9 billion. InvestingPro identifies share buybacks as a key strength, with the company maintaining strong cash flows that sufficiently cover its obligations while operating with a moderate level of debt.
The company’s year-to-date business growth was reported at 7%, which some investors speculated might be a guide for the calendar year 2025 (CY25). However, the Cantor Fitzgerald analyst believes that while the company might not have intended this as a formal guidance, a growth rate of at least 5% in CY25 is achievable. This outlook suggests a balanced revenue distribution between the first and second halves of CY25.
Looking forward, the analyst predicts that Applied Materials’ growth could re-accelerate into calendar year 2026 (CY26), with EPS potentially reaching at least $11.00, surpassing the consensus estimate of $10.34. The firm’s positive outlook is also supported by the de-risking of the China market across both ICAPS and AGS segments and the potential tailwind from rising 28nm demand in CY26.
In conclusion, Cantor Fitzgerald encourages investors to consider adding to their positions in Applied Materials if the stock weakens, given the company’s performance and the analyst’s forecast of a $9.56 EPS for CY25, slightly above the consensus of $9.34. Shares were trading at approximately 15 times earnings in the after-market, a valuation the analyst suggests could present an opportunity for investors. InvestingPro analysis shows the company maintains an impressive Financial Health Score of 2.96 (GOOD), with a strong track record of dividend payments for 21 consecutive years and a 43.75% dividend growth in the last twelve months. For deeper insights into Applied Materials’ valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, along with 13 additional ProTips and extensive financial metrics.
In other recent news, Applied Materials reported financial results that largely met Wall Street expectations, with revenue and earnings per share (EPS) slightly exceeding projections. Citi analyst Atif Malik increased the price target for Applied Materials to $190, maintaining a Buy rating, while BofA Securities also raised its target to $190 with a similar rating. However, JPMorgan and Raymond James reduced their price targets to $210 and $200, respectively, though both firms maintained positive ratings on the stock. Evercore ISI also adjusted its target downward to $209, yet kept an Outperform rating, citing favorable risk/reward positioning.
The company’s outlook for the July quarter aligns with consensus estimates, with anticipated growth in advanced foundry, logic, and DRAM sectors. Applied Materials faces challenges in its ICAPS segment, particularly due to decreased spending on mature technologies in China. Despite these challenges, analysts highlight the company’s strategic positioning in key growth areas like Gate-All-Around transistors and advanced DRAM technologies. Applied Materials’ management remains confident in achieving long-term growth, supported by robust demand in advanced logic and high bandwidth memory sectors.
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