Shares of Applied Materials (NASDAQ:AMAT) continued to trend lower in pre-market trading at the time of writing on Friday even as the company’s Q1 earnings beat expectations.
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Top-rated KeyBanc analyst Steve Barger is of the opinion that the stock has limited upside. Laying out the bull and bear case scenarios for the stock, Barger stated that in a bull case scenario, with rising chip demand, AMAT shares could rise as high as $138 from the current level of $130. In contrast, Barger pointed out that in a bear-case scenario, AMAT shares could fall to the same level they were in November of last year – around $85. The analyst is sidelined on the stock with a Hold rating.
Barger commented, “Shares of AMAT and peers have enjoyed robust price appreciation this year while timing expectations for recovery have been pushed out. Investors may have discounted a stronger recovery than we are likely to see in the near term, which could increase risk for new money as shares have little underlying valuation support.”
The company’s management, however, did warn on its Q1 earnings call that it expects “our capital expenditures to be higher over the next several years, there is no change to our longer-term financial model and our strong commitment to shareholder returns. In summary, Applied Materials is executing well and demonstrating the advantages of our broad and diverse portfolio, markets and customer base.”
Analysts remain cautiously optimistic about AMAT stock with a Moderate Buy consensus rating based on 16 Buys, four Holds, and one Sell.
