Applied Materials (NASDAQ:AMAT) delivered better-than-expected Q4 financials and a Q1 Fiscal 2024 outlook. However, shares of the semiconductor equipment manufacturer fell 7.6% in Thursday’s after-market trading as the Justice Department is probing the firm for a potential violation of export restrictions to China, Reuters reported. While AMAT stock is trending lower, Wall Street analysts maintain a bullish outlook, suggesting a Buy near the current levels.
Let’s delve deeper.
Applied Materials is Under Probe
Per the report, Applied Materials shipped equipment worth hundreds of millions of dollars to the Chinese company SMIC through South Korea without the required export licenses. The company stated that it is working with the government and is following all necessary laws, including export controls and trade regulations.
Notably, the U.S. Department of Commerce has enhanced export restrictions on AI (Artificial Intelligence) technologies, advanced chips, and semiconductor equipment to China. The move is designed to limit the flow of cutting-edge U.S. technology to China and other countries that could be used to bolster military and intelligence capabilities.
It remains uncertain whether the investigation will result in charges or penalties. Meanwhile, let’s understand why analysts are bullish about AMAT stock.
What is the Future of AMAT Stock?
Wall Street analysts are optimistic about the future of AMAT stock. Five-star analyst Vijay Rakesh of Mizuho Securities reiterated a Buy recommendation on Applied Materials stock following Q4 earnings. The analyst is upbeat about AMAT’s long-term prospects and expects the company to benefit from its “strong ~$17B backlog and secular technology transitions.” However, the analyst highlighted that Applied Materials stock fell after hours due to concerns over the “potential US sanctions” and lack of WFE (Wafer Foundry Equipment) guidance for 2024.
Overall, Applied Materials stock has received 18 Buy, three Hold, and one Sell recommendations for a Strong Buy consensus rating on TipRanks. Further, the average AMAT stock price target of $162.52 implies an upside potential of 4.98% from current levels.
Bottom Line
While AMAT stock is under investigation, the consequences of the investigation remain uncertain. On a positive note, the company’s solid backlog and robust demand for its products, led by higher spending on AI data centers, Cloud, and PCs, keep analysts bullish. However, AMAT stock has risen over 60% year-to-date, which limits the upside potential in the near term, as reflected through analysts’ average price target.
