On Friday, TD Cowen adjusted its outlook on Applied Materials (NASDAQ:AMAT) shares, increasing the price target to $250 from the previous $245 while maintaining a Buy rating on the stock.
The firm noted that spending on China DRAM has been consistent, adding about $500 million per quarter for the last three quarters. However, this trend is expected to decline significantly in the July quarter.
Despite the anticipated drop in China DRAM spending, the firm pointed out that there is a counterbalancing factor. A recovery in Integrated Circuits and Systems Applications (ICAPS) and leading-edge foundry is projected, which could lead to guidance slightly above the consensus for the July quarter.
The firm's confidence in maintaining a Buy rating is underpinned by the continued upward inflection in technology-driven revenues, specifically citing advancements like Gate All Around and Advanced Packaging (NYSE:PKG).
The analyst from TD Cowen highlighted the normalization of China's DRAM spending as a significant factor, with expectations set for a considerable decrease in the upcoming July quarter. This normalization comes after a period of sustained investment growth in the sector.
In contrast to the slowdown in DRAM spending, Applied Materials is expected to benefit from other sectors within the industry. The firm anticipates that the growth in revenues will be driven by technology inflections, which continue to trend upwards, suggesting a positive outlook for Applied Materials' performance in these areas.
The increase in Applied Materials' price target reflects the firm's assessment of the company's financial prospects and market position.
With the Buy rating reaffirmed, TD Cowen signals its confidence in the company's ability to navigate the changes in market dynamics and capitalize on the technological advancements within the semiconductor industry.
InvestingPro Insights
Following TD Cowen's updated outlook on Applied Materials (NASDAQ:AMAT), the company's financial health and market performance continue to be of interest to investors. In light of this, certain metrics from InvestingPro offer additional insights. Applied Materials has shown a commitment to shareholder returns, having raised its dividend for 6 consecutive years and maintained payments for 20 consecutive years, reflecting a stable financial policy. Despite a high P/E ratio of 25.21, which suggests a premium valuation relative to near-term earnings growth, the company's prominence as a key player in the Semiconductors & Semiconductor Equipment industry supports its market position.
InvestingPro Data also reveals a market capitalization of $177.84 billion and a price close to its 52-week high, indicating strong investor confidence. With a revenue growth over the last twelve months of 0.88% and an operating income margin of 28.89%, Applied Materials demonstrates solid profitability. The stock's price has seen a significant uptick over the last six months, with a total return of 44.59%, showcasing its robust performance in the market. For those seeking more comprehensive analysis, InvestingPro provides additional tips on Applied Materials, which can be accessed with an exclusive offer using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Interested readers can find a total of 17 InvestingPro Tips on Applied Materials, which could further inform investment decisions and provide a deeper understanding of the company's financial landscape.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.