Why Applied Materials Shares Are Rocketing Today

Applied Materials Inc AMAT shares are trading higher Friday after the company reported better-than-expected financial results yesterday. Also, several analysts raised the price targets.

Yesterday, Applied Materials reported first-quarter FY24 earnings of $2.13 per share, beating the analyst consensus estimate of $1.91, and sales of $6.71 billion, beating the analyst consensus estimate of $6.48 billion.

Applied Materials sees second-quarter adjusted earnings per share of between $1.79 and $2.15, versus the $1.79 estimate, and second-quarter revenue of between $6.1 billion and $6.9 billion, versus the $6.3 billion estimate.

Maintaining a Buy rating, B.Riley Securities increased the price target to $250 (from $220), Stifel to $230 (from $175), Needham to $240 (from $180), Mizuho Securities to $225 (from $185), Goldman Sachs to $220 (from $156) and BofA Securities to $222 (from $185).

BofA Securities analyst Vivek Arya says Applied Materials is well leveraged across multiple technology enablers of AI silicon, including high-bandwidth memory, advanced packaging, and leading-edge logic.

Overall, the analyst raised CY24/25 pf-EPS by 6%/9% to $7.96/$9.40.

Also, B.Riley analyst Craig A. Ellis sees better-than-expected new product SAM expansion, multi-segment sales growth, material gross margin and operating margin expansion, and EPS-accretive cash redeployment as tailwinds. Ellis expects a gradual industry recovery to gain steam through 2024 and accelerate in 2025 and estimates EPS of $8.47 in FY24 and $9.09 in FY25.

Moreover, Stifel analyst Brian Chin says Applied has a broader product portfolio to address semi-customers’ future technology roadmap scaling/integration challenges and has more pathways to SAM expansion/solutions engineering than many of its peers. The analyst expects EPS of $8.04 in FY24 and $10.32 in FY25.

Also Read: Applied Materials Surges After Q1 Earnings: Why The Stock Chart Is Bullish

Mizuho analyst Vijay Rakesh sees Applied as the top global semi cap equipment supplier, benefiting from HBM ramps and strong leading-edge foundry logic. The analyst raised EPS estimates to $1.97 (cons. $1.79) from $1.88 for the April quarter, $7.92 (vs. cons. $7.76) from $7.90 in FY24, and lowered to $8.94 (cons. $8.99) from $9.02 for FY25.

Goldman Sachs analyst Toshiya Hari expects Applied’s scale and broad portfolio to support cross-cycle share gains, margin expansion, and above-average earnings growth going forward.

However, the analyst expects the Wafer Fab Equipment market backdrop to remain mixed with weakness across trailing-edge process nodes projected to largely offset incremental strength in DRAM and Logic/Foundry business. Nevertheless, Hari raised operating EPS estimates by 11% to $8.02 for FY24 and 12% to $10.45 for FY25.

Needham analyst Charles Shi says Applied’s share gains in DRAM over the past years and potential share gains in leading-edge foundry/logic over the coming years could mean what the company gained over the past cycle is here to stay.

J. P. Morgan analyst Harlan Sur boosted the price target to $230 (from $170) and reaffirmed an Overweight rating. The analyst expects Applied Materials to continue to benefit from healthy foundry/logic/DRAM exposure and market share gains over the mid-term, allowing it to outpace WFE trends. The analyst expects EPS of $8.40 in FY24.

Meanwhile, KeyBanc analyst Steve Barger maintain the Sector Weight rating and increased estimates to reflect expectations for cyclical improvement. The analyst raised the FY24 EPS estimate to $8.81 from $7.39 (consensus $7.73) and FY25 estimate to $10.26 from $8.37 (consensus $9.03), reflecting 11% revenue growth (7% prior) at 41% incremental (42% prior).

Also, Raymond James raised the price target to $225 (from $180) and reiterated the Outperform rating, and Susquehanna upped the target to $160 ($138) and kept the Neutral rating.

Price Action: AMAT shares are up 7.95% at $202.57 on the last check Friday.