Sell Rating for Applied Materials Due to Lack of Upside and Emerging Headwinds

In a report released today, Joseph Moore from Morgan Stanley maintained a Sell rating on Applied Materials (AMAT – Research Report), with a price target of $162.00.

Joseph Moore’s rating is based on several factors that influenced his decision to issue a Sell rating for Applied Materials. One of the primary reasons is that the company’s performance did not exhibit the modest upside seen in its peers, such as KLAC and LRCX, and instead aligned closely with expectations. Additionally, the decline in the Chinese market was slightly more pronounced than anticipated, which contributed to the lack of positive momentum. Although the overall wafer fabrication equipment (WFE) environment is performing better than expected, driven mainly by DRAM, Applied Materials’ results were consistent with the projections, without showing significant improvement.
Another critical factor in Moore’s assessment is the emergence of headwinds in services, particularly related to 200mm investments, likely in China. This has been a significant factor in the company’s inability to experience the same uptick observed in other areas. Despite discussions around AI, it is not the main driver in logic, as foundry logic is primarily driven by ICAPs and new technologies, with minimal spending on smaller nodes. While there is strength in 2nm gate all-around technology, and ICAPS remains robust outside of China, the spending on nodes relevant to AI markets remains minimal. This lack of growth drivers and cycle headwinds has led to a slightly lower price target, reinforcing the Sell rating.

Based on the recent corporate insider activity of 44 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of AMAT in relation to earlier this year.