In a report published Wednesday, Bank of America analyst Krish Sankar upgraded the rating on Applied Materials AMAT from Neutral to Buy, and reiterated the $25.00 price target.
In the report, Bank of America noted, “We are upgrading AMAT to a Buy from Neutral and maintain our $25 PO. The recent sell off makes the stock very attractive. The three key reasons for our Buy rating are: (1) while we remain bullish on the semicap cycle, AMAT is more of a restructuring story, making it cycle-agnostic in the intermediate term and not as susceptible to the noise around demand/yield. (2) We do expect the merger with Tokyo Electron (TEL) to close (timing could be C1Q15) & est combined ‘normalized' earnings power in a $31B wafer fab equipment (WFE) spend to be $1.80 implying the stock is trading at a very attractive 10-11x normalized EPS, and (3) in the unlikely scenario the deal breaks, we expect AMAT would trade down to $17-18 (~13x CY15E stand-alone EPS), i.e. limited downside with upside to our PO of $25.”
Applied Materials closed on Tuesday at $19.33.
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