Applied Materials (AMAT) Stock: Wall Street Upgrades Signal Confidence in Chip Equipment Leader

TLDR

• Stifel lifts Applied Materials price target from $250 to $340 with Buy rating intact
• RBC Capital starts coverage with Outperform rating and $385 target price
• Stock trades at 20% discount to semiconductor equipment peers at 30x P/E
• Company marks eighth straight year of dividend growth with $0.46 quarterly payout
• Analysts highlight strong DRAM positioning and broad technology portfolio as catalysts

Applied Materials received back-to-back analyst upgrades this week as Wall Street grows more optimistic about the semiconductor equipment maker’s prospects.

Applied Materials, Inc., AMAT

Stifel bumped its price target to $340 from $250. RBC Capital launched coverage with an Outperform rating and $385 target. The stock currently changes hands around $302.

Both firms cite Applied Materials’ market positioning as a key reason for their bullish stance. The company’s diverse product lineup gives it multiple paths to growth that competitors lack.

Stifel pointed to Applied Materials’ ability to solve complex technology challenges for chip manufacturers. The firm believes this capability will drive market share gains as the industry enters its next growth phase.

RBC Capital analyst Srini Pajjuri focused on the DRAM opportunity. He expects spending on DRAM manufacturing equipment to grow faster than the overall wafer fab equipment market over the coming year.

The stock delivered a 77% return over the past 12 months. This came despite headwinds from China restrictions and softer spending on older chip technology nodes.

Valuation Gap Creates Entry Point

Applied Materials trades at 30 times earnings. That represents a 20% discount compared to other semiconductor capital equipment companies.

RBC Capital views this valuation gap as an opportunity. The firm sees a favorable risk-reward setup at current levels.

Stifel expects Applied Materials to hit higher revenue and profit peaks during the next industry upswing. The company showed resilience during the recent downturn, which strengthens the case for premium valuation.

Applied Materials continues rewarding shareholders through dividends. The company just announced its eighth consecutive annual dividend increase to $0.46 per share quarterly.

Technology Transitions Drive Growth

Several technology shifts should benefit Applied Materials in coming years. The move to backside power delivery represents one major opportunity.

Hybrid bonding technology is another growth area. Advanced 3D transistor designs also require new equipment capabilities.

Applied Materials’ broad product portfolio positions it to capture spending across these emerging technologies. Limited merger activity in the sector makes this internal capability even more valuable.

TD Cowen previously set a $315 target on the stock. KeyBanc Capital Markets established a $285 target. UBS upgraded the stock to Buy with a $285 target based on equipment demand expectations.

The stock trades near its 52-week high of $310.64. Analyst targets span from $190 to $425, reflecting varied views on upside potential.

Applied Materials holds strategic positions in high-growth chip manufacturing segments. DRAM memory and leading-edge foundry production remain key focus areas.

Wafer fab spending should increase over the next year. Analysts expect Applied Materials to grow at least in line with the broader market during this period.

The company faced share losses in certain categories last year. China-related pressures and competitive dynamics contributed to these challenges.

Despite near-term obstacles, analysts see multiple catalysts ahead. The combination of technology transitions, attractive valuation, and market position drives the positive outlook.

RBC Capital noted Applied Materials beat the SOX semiconductor index last year but trailed some domestic equipment peers. The firm expects this performance gap to narrow as industry conditions improve.

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