On Friday, Morgan Stanley updated its outlook on Applied Materials (NASDAQ: ), raising the stock's price target slightly to $224 from $223 previously, while maintaining an Equalweight rating on the stock. The company's view is that recent developments have significantly reduced the short-term risks associated with export controls.
According to an analyst statement, concerns about China's DRAM industry that may be affected by the next wave of export restrictions have been eased. Reports have suggested that further restrictions may be considered, but with the reduction of China DRAM to low levels this quarter and expected to remain so next, the potential impact on earnings per share (EPS) is expected to be materially reduced.
The analyst expressed surprise at the strength of the compensation in the following logical sectors, which was not expected. However, the drivers of advanced technology appear to be in favor of Applied Materials, which has contributed to the firm's decision not to take a cautious stance.
The valuation model used by Morgan Stanley involves maintaining a multiple of 23 times earnings (PE) in the calendar year 2025. Based on the new estimated EPS of $9.74 for CY25, the small price increase to $224 has been. fixed.
The update reflects Morgan Stanley's analysis of the current situation surrounding Materials, taking into account the potential impacts of geopolitical and market factors on the company's performance.
In other recent news, Applied Materials has been the focus of various financial reviews and projections. The semiconductor company's third-quarter financial results beat expectations, with revenue of $6.778 billion and earnings per share (EPS) of $2.12. Goldman Sachs reiterated its buy rating on the company's stock, expecting a positive growth trajectory through 2025. Bernstein also raised his price target on Applied Materials to $250, maintaining an Outperform rating.
In addition to strong earnings, Applied Materials forecast fourth-quarter growth, which it attributes to increased demand in the leading Logic/Foundry and High-Bandwidth Memory sectors. Deutsche Bank adjusted its price target for the company to $230, noting strong financial results and a slight increase in revenue and gross margin estimates.
Applied Materials is also introducing a series of new engineering materials aimed at improving the performance per watt of computer systems. In addition, the company announced a 25% increase in its quarterly dividend, increasing from $0.32 to $0.40 per share.
InvestingPro Insights
As Morgan Stanley updates its outlook on Utilities, real-time data and insights from InvestingPro provide more context to the company's financial health and market performance. Applied Materials has demonstrated a consistent record of rewarding its shareholders, as evidenced by its six consecutive years of dividend increases, demonstrating a commitment to returning value to investors. Analysts are also showing confidence in the company's earnings potential, with 18 analysts revising their earnings estimates upward.
InvestingPro data also sheds light on the company's market position with a firm market capitalization of $175.39 billion and a P/E ratio of 24.15, which, although on the high side, may indicate investor confidence in its future growth. The company also had a significant return last week, with a total price gain of 10.8%, reflecting its recent market momentum. Despite some volatility in stock price movements, Applied Materials maintains a strong financial base with liquid assets exceeding short-term obligations.
For investors looking to delve deeper into Applied Materials' prospects, there are additional InvestingPro tips available, which provide insight into the company's industry position, financial stability, and growth potential. To explore these further, visit
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