Applied Materials ICAPS Strength Is 'On Fire,' Analyst Review Q2 Results, Outlook

Zinger Key Points
  • Applied Materials’ results show backlog may have declined sequentially for the first time in around 10 quarters, one analyst said.
  • ICAPS demand is not limited to China and the announced infra spend may be spread over years, another analyst added.

Shares of Applied Materials, Inc. AMAT tanked in early trading on Friday, after the company reported upbeat earnings for its fiscal second quarter.

The report came amid an exciting earnings season. Here are some key analyst takeaways from the earnings release.

  • Needham analyst Quinn Bolton reiterated a Buy rating, while raising the price target from $135 to $140.
  • Bernstein analyst Stacy Rasgon reaffirmed an Outperform rating, while raising the price target from $140 to $150.
  • KeyBanc analyst Steve Barger maintained a Sector Weight rating on the stock.

Check out other analyst stock ratings.

Needham

Applied Materials’ quarterly results came in better than expectations “across the board,” Bolton said in a note.

ICAPS (IoT, Communications, Automotive, Power and Sensors) strength "continues to be the shining star as the segment continues to absorb weakness across memory and advanced F/L,” he added.

Applied Materials “caught up with most past-due balances” in the latest quarter, which could mean that its backlog “fell sequentially for the first time in ~10 Qs.”

Bernstein

Applied Materials reported “solid” quarterly results, with earnings and revenues ahead of the consensus estimates, as ICAPS “remains on fire, offsetting weakness in leading edge foundry/logic and considerable downside in memory,” Rasgon wrote in a note.

The stock came under pressure, likely due to concerns around ICAPS sustainability and the announcement of an upcoming infrastructure spending program, the analyst said. He added, however, that ICAPS demand “is broad-based, not just China” and the infrastructure spending program may be “spread over a fairly long period of time,” he added.

KeyBanc Capital Markets

“AMAT’s broad message was similar to that of peers, with Memory remaining under significant pressure and leading-edge Foundry/ Logic seeing some push-outs, offset by strength in its ICAPS business and certain geographies including China,” Barger said.

Shares or Applied Materials and its peers “have enjoyed robust price appreciation this year while timing expectations for recovery have been pushed out,” the analyst stated. “We think investors may have discounted a stronger recovery than we are likely to see in the NT,” he added.

AMAT Price Action: Shares of Applied Materials had declined by 2.43% to $126.76 at the time of publishing Friday.

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Posted In: Analyst ColorEarningsNewsPrice TargetReiterationTop StoriesAnalyst RatingsMoversTrading IdeasBernsteinExpert IdeasKeyBanc Capital MarketsNeedhamQuinn BoltonStacy RasgonSteve Barger
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