Applied Materials Caps Record Year, But We’re Still Trimming Our Price Target

ملخص مفصل

We join Wall Street in assigning more restrained valuation multiples to AMAT, despite higher EPS expectations.

We join Wall Street in assigning more restrained valuation multiples to AMAT, despite higher EPS expectations.

Following another vibrant quarter for Applied Materials (AMAT), Wall Street consensus on earnings per share figures for 2027 and 2028 are moving higher. But the price targets? They are going in the opposite direction.

Let’s examine why the divergence, but first, let’s look at the consensus on EPS. The figure for next year is now at $19.32, up from $18.75, and greater visibility has lifted the consensus figure for 2028 to $25.75 from $23.91. Normally that would lift AMAT shares, but instead Wall Street is dialing back price targets, implying more conservative multiples than before. Given the current environment, that’s not entirely unexpected. But those cuts still point to ample upside for AMAT shares. Meanwhile, AMAT’s quarter was characterized by continued strong demand and further signs of pricing power.

Where are those Wall Street folks taking their AMAT price targets? From the information we have so far, the bulk of those new targets are clustered between $500 and $600 down from $580 to $700. And we’ve also seen one price target increase to $500 from $475, with a few more outliers point up and down.

When we look at those new expected EPS figures for 2027 and 2028, they call for Applied to nearly double its EPS compared to the $12.89 posted for its now finished fiscal 2026. Based on last night’s closing share price, that puts AMAT shares around 14.8-times expected 2028 EPS, a discount to the S&P 500. That tells us the shares are undervalued given the level of expected growth as more fabs come on stream and lines at existing ones are expanded to address the current chip shortage that is expected to persist well into 2027 if not 2028.

Adding more than some credence to that outlook are the forecasts from the hyperscalers, more recently the neoclouds, Cerebras (CBRS) and Cisco (CSCO) last night, not to mention the committed spending levels from Anthropic.

So…

مطلع المقال، مقتطف من TheStreet. لقراءة المقال كاملًا، افتحه على موقع الناشر.