Applied Materials Analysts Find US Embargo Taking A Toll On Company Guidance

Needham analyst N. Quinn Bolton cut the price target on Applied Materials to $90 from $125 and maintained a Buy. Last night, AMAT announced it is lowering its Q4 FY22 revenue and EPS guidance by $250 million and $0.35, respectively, due to recently announced export control actions. 

The total impact from the new U.S. export restrictions on 14 and 16nm and below advanced logic, 128L and above NAND, and 18nm half-pitch and below DRAM implemented October 7 will likely be $400 million +/- $150 million. 

More robust shipments outside China partially offset the impact as component supply improved in the quarter. Although the ~$400 million impact comes from only one month of Q4, AMAT expects a similar effect for all of Q1 FY23. 

Bolton cut his FY23 sales estimate by $1.9 billion to reflect the impact of restrictions and forthcoming demand weakness.

Wells Fargo analyst Joe Quatrochi had an Overweight and $100 price target. Post close on October 12, Applied Materials revised its Q4 guidance following the U.S. export restrictions for semi-equipment and related parts and services. 

AMAT's revenue guide now stands at $6.4 billion +/- $250 billion compared to the prior guide of $6.65 billion +/- $400 million. His previous estimate was $6.67 billion (Street: $6.66 billion).

AMAT's updated non-GAAP EPS forecast now stands at $1.54-$1.78, compared to the prior $1.82-$2.18 (vs. his last $2.02.; Street $2.00). 

AMAT noted it includes a $0.23 per share or~$200 million charge for the initial estimated impact of inventory and remanufacturing charges related to the export restriction. 

The price target reflects Quatrochi's belief that shares should trade at a modest premium to Lam Research Corp LRCX given higher exposure and market share in foundry and logic. 

Price Action: AMAT shares traded higher by 4.35% at $79.32 on the last check Thursday.