Market Overview

3 Reasons Why Cowen Upgraded Applied Materials

3 Reasons Why Cowen Upgraded Applied Materials
Related AMAT
The Chips Are Down: Weak Forecasts Hurt Semiconductor Stocks
8 Biggest Price Target Changes For Friday
Tech Stocks Recover After Early Downdraft; Applied Materials Reverses Higher (Investor's Business Daily)

Applied Materials, Inc. (NASDAQ: AMAT) shares have taken a hit due to industry-specific issues, but Cowen is optimistic about the stock's future. 

The Analyst

Cowen analyst Krish Sankar upgraded Applied Materials from Market Outperform to Outperform and increased the price target from $60 to $62.

The Thesis

The recent pullback in Applied Materials shares is due to "near-term weakness in memory WFE and a reset in display equipment forecasts," Sankar said in the Monday upgrade note. 

Cowen's newly bullish stance is based on three factors, the analyst said: 

  • Near-term weakness in memory is already reflected in the stock price. The company is likely to benefit from a potential rebound in memory WFE spending after the calendar 2018 third quarter.
  • The reset in 2019 expectations for the display segment derisked estimates.
  • With the stock trading at a 17-percent discount on a P/E and EV/EBITDA basis relative to its large-cap peer group median and a 22-percent discount to its three-year forward P/E, the analyst said the valuation is attractive.

As far as near-term and 2019 expectations are concerned, Cowen forecast for the company to hit the low end of the July quarter revenue and EPS guidance assuming a 12-percent sequential drop in semiconductor sales. Cowen forecast another 5-percent sequential drop in October.

Display sales are projected to decline 16 percent and 20 percent in 2019 and 2020, respectively, after 32-percent gorwth in 2018, Sankar said. 

"Nevertheless, the strength in semiconductor WFE should help AMAT grow its overall revenue and earnings in FY19 and FY20." 

The Price Action

Applied Materials shares have lost about 4 percent year-to-date. The stock was trading up 1.38 percent at $49.52 at the time of publication Monday. 

Related Links:

Bluefin Research Talks Trade War Impact On Nvidia, AMD

A Good Time To Buy Equipment Stocks': Citi Upgrades Lam Research, Updates Sector Model

Photo courtesy of Applied Materials. 

Latest Ratings for AMAT

Nov 2018B. Riley FBRMaintainsNeutralNeutral
Nov 2018Wells FargoMaintainsOutperformOutperform
Nov 2018Summit Insights GroupDowngradesBuyHold

View More Analyst Ratings for AMAT
View the Latest Analyst Ratings

Posted-In: Cowen Krish SankarAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (AMAT)

View Comments and Join the Discussion!

Latest Ratings

CPAImperial CapitalDowngrades68.0
PRMWImperial CapitalInitiates Coverage On18.0
TGTKeyBancInitiates Coverage On110.0
QCOMMorgan StanleyUpgrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Mid-Afternoon Market Update: Dow Up Over 50 Points; SeaWorld Entertainment Shares Gain Following Q2 Results

Qualcomm's Risk-Reward Is Too Favorable to Ignore, Cowen Says In Upgrade