Applied Materials Analyst Roundup Following Q4 Results

Applied Materials, Inc. AMAT reported results Thursday for its fourth quarter and guided its first quarter lower.

Shares fell after the earnings announcement but rebounded by Friday afternoon, trading at $22.89, up 1.19 percent.

Analysts commented on the results and below are some highlights with current ratings and price targets.

Citi - Buy, $26 price target

“While we expected silicon sales to be up qq vs. flat guide on TSMC 16nm orders which inflected this week for long lead time litho equipment, AMAT expects to book them a bit later and guided April up sequentially. Overall, we expect semi cap stocks to look through quarterly volatility in light of +5 - 10 percent Y/Y WFE growth in C15. We model C15/16E WFE spend at $36B/$40B, above Street’s $35B/$37B view, and prefer AMAT on company-specific catalysts like 1Q15 deal closure, multiple expansion on above-average C15/16 WFE growth and management execution, and +$2 EPS power in C16 on both standalone and combined basis.”

Nomura - Buy, $30 price target

“FQ4 revenue of $2.26b and EPS of $0.27 were inline with our estimates. Applied guided FQ1 revenue flat to up 5 percent, versus our estimate of 5 percent growth, due to pushouts in Foundry. Gross margin guidance of 43 percent is also weaker than our forecast of 45 percent. Notwithstanding slightly weaker guidance, Applied is on track to report solid 2014 results with revenue growth of 13 percent. We believe shares may continue to outperform as higher WFE spending and share gains drive above-average revenue growth in 2015. We are lowering estimates slightly off a weaker Jan outlook but continue to believe that the core drivers such as increasing wafer equipment spending, Tokyo Electron merger and enhanced capital returns are intact. We remain buyers of the stock. CY14E EPS from $1.14 to $1.11; CY15E EPS from $1.40 to $1.35.”

Bank of America - Buy, $26 price target

“The management expects the proposed merger with TEL to close (by C1Q15). Not surprisingly, there was no update on the status of the pending approvals from US, China (MOFCOM), Japan, Korea and Taiwan (Germany, Singapore and Israel have approved). The good news is that the management does not expect some of the recent US inversion rules to hinder the ability to do buybacks post-merger (and once incorporated in the Netherlands). We believe the tax rate reduction to 17 percent (and possibly lower) and about $3B buyback (or higher) post-merger could be easily accretive to earnings (over $0.25 in normalized EPS). About 50 percent of AMAT’s cash is on-shore.”

D.A. Davidson - Buy, $27 price target

“F1Q (Jan) outlook should benefit from improving trends in core semiconductor. We model revenue of $2.400 billion and pro-forma EPS of $0.29 and expect the company to guide in line with both our estimates and consensus of $2.358 billion and $0.30 per share. Our top line assumption for mid-single digit sequential growth is predicated on improving order activity across AMAT’s Foundry and Memory customers. We remain comfortable with our current model given the positive commentary from Lam Research who guided C4Q revenue up 7 percent sequentially, sighting healthy Foundry activity across a broad set of customers. On a relative basis AMAT has higher Foundry exposure than Lam, thus we expect AMAT’s core business outlook to be similarly positive.”