Key Takeaways
- Applied Materials stock has declined 24% since October 12, including a 6.7% drop following its October 13 investor presentation.
- Management outlined ambitious 2030 profitability targets but declined to provide a specific wafer fab equipment spending forecast.
- Wall Street expects substantial earnings growth through fiscal 2028, although semiconductor spending uncertainty remains a risk.
- The November 12 earnings report will test whether Applied Materials can support its long-term profitability targets.
Applied Materials (AMAT) stock has fallen 24% since October 12, declining from $497.53 to $377.24 at Friday’s close.
The selloff began after management outlined ambitious profitability targets without providing a specific wafer fab equipment (WFE) spending forecast.
Broader semiconductor weakness and concerns about AI infrastructure spending added pressure, raising the question of whether the decline has created a buying opportunity.
Why Applied Materials Stock Has Fallen
At its October 13 SEMICON West presentation, Applied Materials targeted approximately 54% non-GAAP gross margin and 40% non-GAAP operating margin by 2030.
Management also expects WFE spending to grow faster through 2030 than during the previous decade and targets more than two percentage points of market share gains.
However, CEO Gary Dickerson declined to provide a specific WFE forecast while expressing “tremendous confidence” in computing demand.
AMAT fell 6.7% on October 13, compared with declines of approximately 2.6% to 3.5% for Lam Research, KLA, and ASML.
Selling continued amid inflation concerns and broader semiconductor weakness. AMAT declined another 3.8% on October 14 and 4.8% on October 16, before falling 8.2% on October 22.
Wall Street Still Expects Significant Earnings Growth
Despite the selloff, TIKR’s October 19 consensus snapshot projects normalized EPS rising from $9.42 in fiscal 2025 to $12.79 in 2026, $18.49 in 2027, and $23.65 in 2028.
These projections suggest substantial growth if advanced semiconductor equipment demand remains strong.
However, slower capital spending by chipmakers or delayed AI infrastructure investments could pressure future earnings estimates.
Is Applied Materials Stock Undervalued After the Selloff?
Applied Materials’ valuation has compressed considerably.
Applied Materials now trades at approximately 21.4x forward earnings, compared with nearly 49x at its late-June peak and a five-year average of 21x. Its valuation has returned close to historical levels, potentially making the stock more attractive if earnings growth remains strong.
The continued selloff has made AMAT’s valuation more attractive relative to its historical levels, although the potential upside depends on whether earnings forecasts remain achievable.
A lower multiple may create an opportunity, but it does not automatically indicate undervaluation. Weaker semiconductor spending could reduce earnings expectations and justify a lower valuation.
What Should Investors Watch Next?
Applied Materials will report fiscal fourth-quarter earnings on November 12.
Wall Street expects approximately $10.30 billion in revenue and $4.06 in adjusted EPS, compared with management’s guidance of $10.25 billion and $4.02 in non-GAAP EPS.
Applied Materials reported a 50.4% non-GAAP gross margin in fiscal Q3, providing investors with a profitability benchmark ahead of its November earnings report.
China remains a significant risk, accounting for approximately 30% of fiscal 2025 revenue.
My take: Applied Materials looks more attractive after its selloff, supported by ambitious profitability targets and strong projected earnings growth.
For long-term investors comfortable with semiconductor-cycle volatility, AMAT deserves a closer look. However, the upcoming earnings report must reinforce those expectations, and weaker demand or margins could create further downside.
So what is Applied Materials stock actually worth?
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Disclaimer:
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!
