Susquehanna analyst Mehdi Hosseini maintained Applied Materials, Inc (NASDAQ:AMAT) with a Neutral and raised the price target from $112 to $128.

Pro forma EPS was $1.90, above SFG/consensus estimates of $1.77/$1.74. 

October quarter guide came in above consensus estimates. 

The midpoint of the revenue guide of $6.51 billion ($5.75 billion-$6.55 billion) compares to the consensus of $5.87 billion. 

The midpoint of the EPS guide of $2.00 compares to consensus estimates of $1.60. 

In the SSG space, Memory was down -39% Y/Y and up +23% Q/Q on the back of a strong DRAM quarter (+45% Q/Q, +12% Y/Y) offsetting weak NAND and Advanced Foundry/Logic, while ICAPS was flattish Q/Q. 

China, in part, drove the strength in the July quarter DRAM and for the lagging edge, while AMAT also benefitted from additional TSV-related investment for the HBM application. 

The big surprise is the $500 million of incremental China DRAM embedded in AMAT's October quarter guide and for the trailing edge. The display revenue guide is also better than expected. 

AMAT also noted that $1 billion of unfulfilled orders from 2022 were shipped and recognized for revenues in the first half of FY23. AMAT noted that backlog remains elevated though it failed to provide any quantitative assessment of how it has changed Q/Q and Y/Y. 

The analyst writes the backlog has been declining Q/Q and will soon show a Y/Y decline driven by weak non-China Memory and Leading Edge Foundry/Logic, while ICAPs have already peaked. 

Ironically, AMAT continues to highlight the long-term growth drivers but fails to provide any color on the backlog.

As such, he expects the recent beat and raises will soon come to a stop dialed into his FY/CY24 EPS estimates 20-25% below the current consensus.

Goldman Sachs analyst Toshiya Hari maintained Applied Mat with a Buy and raised the price target from $135 to $155.

Price Action: AMAT shares traded higher by 4.38% at $148.91 on the last check Monday.