Zinger Key Points
- Stifel analyst reiterates Buy on Applied Materials, emphasizing China's role in Q2 earnings preview.
- Analyst highlights revenue bias towards China, projects future growth driven by capacity expansion plans.
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Stifel analyst Brian Chin reiterated the Buy rating on Applied Materials, Inc. AMAT, with a price forecast of $230.
The company will report the second quarter of fiscal 2024 financial results on Thursday, May 16, 2024.
According to the analyst, non-China trailing-edge remains soft and that the timing on expansion in leading-edge foundry-logic and memory is more late FY24/FY25-oriented.
For now, the analyst sees revenue bias still toward China, technology, and conversion (DRAM HBM) activity.
More importantly, the analyst views capacity/growth-driven foundry/logic and DRAM investment plans for 2025.
Per Chin, Applied Materials continues to have a better line of sight than most toward establishing higher revenue and profitability in the ensuing upcycle.
The analyst projects China DRAM (~$500 million in the second quarter) to phase-out of the mix in the third quarter, representing a headwind in Applied’s outlook.
Over the balance of the year, China should remain a steadying factor and might cause Applied Materials to revisit its view.
According to the analyst, Applied Materials has too many tentacles to be fully immune to a slowdown in aggregate semi investment.
Yet by that token, the company possesses a better/broader arsenal of products (portfolio) through which to attack/address semi customers’ future technology roadmap scaling/integration challenges.
Ultimately, the analyst sees Applied Materials on track to establish higher peak revenue/profitability through the ensuing upcycle. It warrants a higher multiple as it demonstrates improved financial performance across the cycle.
Price Action: AMAT shares are trading higher by 3.36% to $216.87 at last check Wednesday.
Image: Courtesy of Applied Materials, Inc.
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