‘China Could Be a Drag on Growth,’ Says Wall Street about Applied Materials (AMAT)

Applied Materials (AMAT) saw strong demand for advanced products like logic and NAND in its second-quarter results, but its growth was somewhat limited by weaker spending in China. Indeed, the company’s revenue was impacted by a 21% drop in China, which caused its stock to drop by 5% in today’s trading. As a result, analysts had varied views on Applied Materials’ performance.

Indeed, J.P. Morgan analysts, while maintaining an Overweight rating, lowered their price target from $240 to $210, due to the company’s exposure to China and weaker spending in the region. They pointed out that there was strong growth in advanced technologies but also noted the drag from older tech, particularly in China. On the positive side, J.P. Morgan expects Applied Materials to benefit from a strong position in advanced foundry and DRAM markets. Bank of America also has some worries about China, but praised the company’s ability to maintain a strong gross margin due to leading-edge demand.

However, Morgan Stanley took a more cautious stance by reiterating its Underweight rating and lowering its target slightly from $164 to $162. The firm noted that while tariffs and export controls might eventually benefit U.S. companies like Applied Materials by encouraging multinational spending in the U.S., the current trade tensions with China are likely to continue creating challenges in the short term. Needham, on the other hand, maintained its Buy rating thanks to Applied Materials’ strong gross margin, especially with the increased contribution from Taiwan, and the success of its process control products.

What Is the Target Price for AMAT?

Turning to Wall Street, analysts have a Strong Buy consensus rating on AMAT stock based on 13 Buys and two Holds assigned in the past three months, as indicated by the graphic below. Furthermore, the average AMAT stock price target of $199.58 per share implies 21% upside potential.

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