On Friday, Applied Materials (NASDAQ:AMAT) saw its stock price target increased by an industry analyst from B.Riley, citing the company's performance and future growth potential. The new price target is set at $255.00, up from the previous $250.00, while the firm maintained a Buy rating on the stock.
The analyst noted that Applied Materials' financial results for the second quarter of fiscal year 2024, released after the market closed on Thursday, and the guidance for the third quarter were slightly above the consensus.
Despite the positive performance and the stock's year-to-date increase of 27% compared to the Semiconductor Index's 15% rise, shares dipped 2% post-market, which the analyst attributes to a likely profit-taking scenario presenting a buying opportunity.
Applied Materials' key segments are reported to be performing well, slightly surpassing forecasts. Although the outlook for the third quarter was somewhat lower, the analyst attributes this to normal multi-quarter linearity rather than a cause for concern.
The company is believed to be benefiting from several significant industry shifts, including advancements in AI logic, DRAM stacking, and advanced packaging, where Applied Materials holds strong market positions.
The company is confident it can substantially outperform the industry growth in the calendar year 2024. It is on track to achieve $3.1 billion in combined revenues from gate-all-around (GAA) transistor architectures and advanced packaging, with $0.5 billion coming from High Bandwidth (NASDAQ:BAND) Memory (HBM).
The analyst suggests that despite a slight decrease in the China mix, which was anticipated, the company's results remain robust. This is especially notable given the current lack of significant DRAM spending and minimal NAND contributions, which are expected to improve in 2025.
In light of these factors, the analyst has made a slight adjustment to the fiscal year 2024 earnings per share (EPS) forecast, decreasing it by 2%, while increasing the fiscal year 2025 EPS forecast by 4%. With the company's favorable positioning for growth, the price target has been raised to $255, reaffirming the Buy rating on Applied Materials shares.
InvestingPro Insights
In the context of Applied Materials' positive financial outlook and the recent increase in its stock price target by industry analysts, key metrics and InvestingPro Tips provide further depth to the company's current market position.
With a market capitalization of $177.84 billion and a P/E ratio on the higher side at 25.21, Applied Materials is trading at a premium relative to its near-term earnings growth. This is further underscored by a PEG ratio of 1.79, indicating that investors may expect a slower growth rate relative to the company's earnings.
InvestingPro Tips highlight that Applied Materials has a commendable track record of raising its dividend for 6 consecutive years, and has maintained dividend payments for 20 consecutive years, reflecting a stable return to shareholders.
Furthermore, the company is a prominent player in the Semiconductors & Semiconductor Equipment industry and has demonstrated the ability to sufficiently cover its interest payments with its cash flows. These factors, combined with the company's moderate level of debt and liquid assets surpassing short-term obligations, present a balanced view of its financial health and investor appeal.
Investors interested in exploring additional insights can find more InvestingPro Tips for Applied Materials at Investing.com. For those considering an in-depth analysis, using the coupon code PRONEWS24 will provide an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Currently, there are 16 more InvestingPro Tips available for Applied Materials, offering a comprehensive look at the company's performance and potential investment opportunities.
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