Semiconductor equipment maker
Applied Materials
doesn’t have much more room to rise after a strong run this year, acoording to analysts at KeyBanc.
In a bull case scenario that assumes further increases in chip demand, Applied Materials (ticker: AMAT) shares may climb as high as $138 from the current level of about $130, strategists led by Steve Barger wrote in a note. In a bear case, shares could drop to $85, where they were around November of last year.
“Shares of AMAT and peers have enjoyed robust price appreciation this year while timing expectations for recovery have been pushed out,” KeyBanc said. “Investors may have discounted a stronger recovery than we are likely to see in the near term, which could increase risk for new money as shares have little underlying valuation support.”
Chip makers and technology companies more generally have had a reasonably good year after experiencing sharp declines in 2022. The gains came even as the Federal Reserve continues to raise interest rates and China recovers more slowly than hoped from Covid-19 lockdowns.
KeyBanc has a Sector Weight rating on the stock.
By contrast, analysts at
Citi
raised their price target on the stock to $160 from $136 after Thursday’s results, and maintained a Buy rating on the shares.
Applied Materials fell on Friday 1.4% in premarket trading even though the company beat earnings estimates but said the market remains difficult. Over the past 12 months, Applied Materials stock has risen 22%, compared with a rally of just more than 10% for the iShares Semiconductor (SOXX) exchange-traded fund, which tracks the performance of the ICE Semiconductor index.
The chip equipment company’s key customers include
Intel
(INTC) which rose 0.5% and
Taiwan Semiconductor Manufacturing
(TSM) down 0.2% (TSM).
Nvidia
(NVDA) rose 0.5%.
Analysts at Semiconductor Advisors LLC said they “have little to no motivation to own the stock.”
“We currently expect memory weakness through the end of the year,” they wrote in a note Thursday. “Memory makers continue to see the worst downturn in well over a decade and have slowed their equipment purchases to near zero levels.”
Write to Brian Swint at brian.swint@barrons.com
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