Applied Materials (AMAT) Stock Forecast & Price Target

Applied Materials is the leading manufacturer of semiconductor wafer fabrication equipment, benefitting from a broad portfolio that spans the entire WFE ecosystem and a strong customer base that includes major players like TSMC, Intel, and Samsung. Despite a modest 3% year-over-year growth in revenue from China for CY24, the company is expected to establish higher peak revenue and profitability as the cyclical recovery progresses, with a notable acceleration in WFE spending anticipated in CY25-26. Additionally, while Applied Materials faces softer demand projections compared to its peers, it is poised for growth in non-China revenue and continues to expand its market share tied to leading-edge capacity investments, positioning the company favorably against a mid-single-digit WFE growth target for CY25.

Applied Materials is facing significant challenges, primarily due to new export controls impacting its revenue trajectory, particularly from the Chinese market, which is projected to decrease from 31% to 26% of total revenue. The company has already disclosed a substantial $549 million reduction in its order backlog, contributing to a lackluster guidance for the upcoming quarters that is below market expectations. Moreover, declining gross margins and market skepticism regarding the company's ability to maintain its competitive position in an evolving semiconductor landscape further underpin a negative outlook for its stock.