Applied Materials semiconductor sales to outperform WFE capex - Loop Capital

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By Sam Boughedda

Loop Capital analysts started Applied Materials (NASDAQ:AMAT) with a Buy rating and $125 price target in a note to clients on Wednesday.

They told investors the firm believes AMAT's Semiconductor sales will "outperform WFE capex, both during the current downturn and when capex turns positive again, which we estimate will be in 3Q24."

"Our view stems from AMAT's PPACt initiatives, which we favor, as they focus on newer methods to advance chip nodes even as Moore's Law slows. AMAT's core competencies line up well with these needed solutions; i.e., many are materials-based. AMAT's larger exposure to foundry/logic versus memory and its AGS segment sales should also limit sales declines in the intermediate term," stated the analysts.

In addition, the firm also favors the company's thrusts in co-optimizing and integrating equipment which "provides new, valued-added solutions for customers," while "the ICAPS BU focuses on trailing edge markets, which have accelerated in the last several years," and Loop Capital expect these sales to grow long-term.

Furthermore, they said "self-help factors" of keeping many operating costs flat and share repurchasing also limit earnings declines while "WFE is weak and pave the way for a pivot back to strong bottom line growth in 2H24-2025."

"We believe the stock will be revalued versus its peers on WFE capex out-performance and a limited duration of quarterly earnings declines," the analysts concluded.

Applied Materials shares are up 2.5% Wednesday.