Key Takeaways
- Thirteen big funds held fewer Applied Materials shares on June 30 than at the end of March, and four of them sold every share, according to their latest 13F filings.
- Several of the sellers added Lam Research, KLA or Teradyne in the same quarter. All three stocks have fallen about as much as Applied since June 30.
- Applied’s stock is down 48% since June 30, while analysts raised their fiscal 2027 earnings estimates. So its forward P/E has fallen from 49x to 21x, right at its five-year average.
- Selling Applied is much harder to justify at 21x than at 49x, and I’d hold the stock into its Nov. 12 report.
Applied Materials (AMAT) reports its fiscal fourth quarter on Nov. 12, and 13 big funds have already cut back. Each held fewer shares on June 30 than at the end of March, according to their 13Fs for the quarter ended June 30. They filed those on Aug. 13 and 14, and they’re the latest each fund has filed.
Four sold out, and a few swapped
Four funds sold every share in the quarter: XN LP, Palestra Capital Management, Contour Asset Management and Junto Capital Management. XN had the biggest stake of the four at March 31, with 483,240 shares, or 6.1% of its 13F stocks. Lee Ainslie’s Maverick Capital sold nearly all of its stake, and so did Tairen Capital.
Others trimmed and kept plenty. Abrams Bison Investments cut its stake 22% and still held 552,000 shares, which made up 19.5% of its 13F stocks and was its second-biggest holding. Analog Century Management cut 21%, and Applied was still its largest position.
Several sellers stayed in chip equipment, though. Anther Capital cut Applied 38% but more than doubled its stakes in Lam Research (LRCX), now 13.9% of its 13F stocks, and Teradyne (TER), now 8.3%. Palestra opened a new Lam stake worth 5.7% of its 13F stocks. Kinetic Partners Management cut Applied 47% and raised its KLA (KLAC) stake 468%.
TIKR tracks 41 analysts on Applied Materials. How many say “Buy”?
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Applied’s rivals fell just as hard
Since June 30, Lam, KLA and Teradyne have each fallen 49%, and Applied is down 48%. (Those moves run from each stock’s June 30 close to its latest close. The filings don’t show what the funds paid or whether they still own the shares, so these aren’t the funds’ returns.) The whole group sold off together, most recently in a chip-stock rout after the midterms.
Applied is the last of the four to report, and the other three’s results show demand still rising. KLA guided December-quarter revenue to $4.7 billion, up from $4.14 billion in September. Teradyne’s third-quarter revenue grew 70%, with record memory test revenue that it credits to AI. Lam guided to $8.6 billion of December-quarter revenue and still expects industry equipment spending to top $200 billion in 2027.
Applied is also the cheapest of the four, at 21x forward earnings. Lam trades at about 22x, Teradyne at 23x and KLA at 25x.
Applied got cheaper while its estimates rose
Analysts expect Applied’s normalized EPS to nearly double, from $9.42 in fiscal 2025 to $18.56 in fiscal 2027:
At the end of June, the fiscal 2027 consensus was $16.40. So analysts raised their numbers while the stock halved. That took Applied’s forward P/E from 49x on June 30, its high of the past five years, to 21x, right at its five-year average:
I can’t know why any of these funds sold. But on June 30, the date their filings capture, Applied was priced at more than twice its usual multiple. Today it’s priced right in line with it.
I’d hold Applied into the report
Wall Street hasn’t backed off much either. The consensus price target is $621, a bit below its September high of $641 and up from $223 a year ago:
The average target is 67% above the latest close. Even the lowest of the 41 analysts’ targets, $358, is only just below the latest close. Not every bull is holding firm, though: B. Riley cut its target to $475 from $700 on Nov. 9, but it kept its Buy rating.
The risk is that these are peak-cycle earnings. Applied traded at 9.6x forward earnings as recently as October 2022. A weak guide for the 14-week first quarter of fiscal 2027 could send estimates down along with the stock.
Still, a stock at 49x forward earnings is an easy one to trim. At 21x, with estimates rising and three rivals reporting more demand, I wouldn’t follow these funds out the door. I’d hold Applied into Nov. 12.
I’d change my mind if fourth-quarter revenue falls well short of the $10.25 billion midpoint Applied gave in its third-quarter release, or if the first-quarter guide shows equipment sales flattening. The funds’ 13Fs for the quarter ended Sept. 30, due by Nov. 16, will also show us whether they kept selling after June.
So what is Applied Materials stock actually worth?
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Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
