On Friday, Mizuho Securities adjusted its outlook on Applied Materials (NASDAQ:AMAT) shares by raising its price target to $245 from the previous $225, while reiterating a Buy rating on the stock.
The firm's decision followed Applied Materials' recent financial disclosures, which included an earnings report that met analysts' expectations for the April quarter and guidance that aligned with projections for the July quarter.
The company highlighted several key points during its earnings report, including a year-over-year doubling of revenue from China, driven by DRAM sales.
However, it anticipates a normalization in the second half of the year, with expectations of China DRAM revenues declining significantly from approximately $500 million per quarter to nearly zero by the fourth fiscal quarter.
Additionally, Applied Materials reported a sixfold increase in HBM revenues for 2024, reaching $600 million, up from the previously forecasted fourfold increase.
Applied Materials also noted substantial growth in its GAA technology, estimating around $2.5 billion in revenue for 2024, with expectations to double into 2025.
Despite the depressed NAND spending, which could be seen as positive for Micron Technology (NASDAQ:MU) and Western Digital (NASDAQ:WDC), the company expects a reduction in China DRAM spending of about $600 million to $900 million in the second half of 2024. This is anticipated to be offset by increased spending in ICAPS and logic sectors due to GAA technology ramps.
The firm's endorsement of Applied Materials rests on its position as the top global semiconductor equipment supplier. The updated estimates and price target reflect the company's strong growth prospects in various technology segments, despite the anticipated decline in China's DRAM spending in the latter half of the year.
InvestingPro Insights
In light of Mizuho Securities' updated outlook on Applied Materials (NASDAQ:AMAT), it's worth noting some key financial metrics and InvestingPro Tips that may interest investors. Applied Materials boasts a substantial market capitalization of $177.84 billion, underscoring its significant presence in the semiconductor industry. The company's P/E ratio stands at 25.21, which, while indicative of investor confidence, suggests a high valuation relative to near-term earnings growth. Additionally, with a P/B ratio of 10.2 as of the last twelve months ending Q1 2024, the stock is trading at a high valuation relative to its book value.
From an investor's standpoint, Applied Materials has shown commendable consistency by raising its dividend for 6 consecutive years and maintaining dividend payments for 20 consecutive years. This track record could be a reassuring sign for income-focused shareholders. The company's stock price has experienced a significant uptick over the last six months, with a 44.59% return, and it is currently trading near its 52-week high, at 97.84% of the peak price.
For those considering a deeper dive into Applied Materials' financial health and stock performance, InvestingPro offers additional insights. There are over 16 additional InvestingPro Tips available, including analysis of the company's cash flow, debt levels, and profitability forecasts. Interested readers can unlock these valuable insights and more with a subscription to InvestingPro. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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