Applied Materials (AMAT) Stock Forecast & Price Target

Applied Materials is recognized as the largest manufacturer of semiconductor wafer fabrication equipment, holding a significant market share in deposition processes crucial for semiconductor production. Despite a modest 3% year-over-year growth in revenue from China in CY24, the company is anticipated to achieve higher revenue and profitability during the upcoming upcycle, aided by its extensive customer base including industry giants like TSMC, Intel, and Samsung. Additionally, Applied Materials' service division, comprising approximately 23% of sales, is projected to experience robust growth, supported by long-term contracts and an expected increase in wafer fabrication equipment spending in CY25-26.

Applied Materials has experienced a 27% decline in share price since early July 2024, indicating market concerns about its future performance. Key risks include a potential decrease in capital expenditure from Chinese suppliers, ongoing supply chain challenges, and weakening global semiconductor demand, all of which could hinder revenue and profitability growth. Additionally, the company has disclosed a significant $549 million reduction in its order backlog, raising further apprehension about its ability to meet previous earnings guidance in light of new China export controls.