Key Takeaways
- Applied Materials stock fell 6% today after a record quarter, as its revenue guide missed estimates and at least 10 firms cut their price targets.
- Management said supply limits held back the guide, and it sees wafer fab equipment spending up more than 30% in 2027.
- That outlook bears on Lam Research and KLA, which sell into the same chipmaker budgets.
- Morningstar called AI worries overblown, and at its usual multiple, the stock looks like a buy.
Applied Materials (AMAT) posted the biggest quarter in its history after Thursday’s close, and the stock is down 6% today anyway.
On the call, CEO Gary Dickerson said that “wafer fab equipment demand will be up more than 30% year-over-year” in 2027. That’s a call on the same budgets that pay Lam Research (LRCX) and KLA (KLAC).
A record quarter, a lighter guide
Fourth-quarter revenue rose 53% to a record $10.41 billion, and non-GAAP EPS jumped 92% to $4.16, both ahead of estimates. But Applied guided first-quarter revenue to $11.1 billion at the midpoint, below the $11.41 billion analysts expected, in a 14-week quarter, a week longer than usual. Management said revenue would be slightly higher if supply weren’t so tight, and its $4.35 EPS guide topped the $4.25 consensus. Summit Insights still downgraded the stock to Hold, and Jefferies cut its target to $580 from $770 while keeping a Buy rating.
Analysts’ consensus has normalized EPS climbing 45% in fiscal 2027, to $18.75.
I don’t see much in this report that should pull those estimates down.
Lam, KLA and ASML (ASML) are in the same boat
Applied’s peers are guiding higher too. Lam guided December-quarter revenue to $8.60 billion at the midpoint, up from a record $8.22 billion, and KLA guided to $4.7 billion, from $4.14 billion. ASML said in its third-quarter release that its planned supply for both 2027 and 2028 “will not fully meet the demand of our customers.” So the open question for all four is how fast cleanroom space and parts can catch up, and ASML’s Jan. 27 report is the next read.
TIKR tracks 40 analysts on Applied Materials. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Applied Materials, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Applied Materials’ Analyst Ratings
Morningstar has a point
Morningstar raised its fair value estimate to $570 from $520 and called AI market concerns “overblown at this point.” The valuation backs that up. Applied traded at 22x forward earnings going into today, close to its 21x five-year average and less than half its 49x peak in June.
I’m with Morningstar. Applied says it could sell more than it can ship, and the stock trades at an ordinary multiple, so the drop looks like a buying opportunity to me. Of course, equipment booms end: Applied is investing to double its systems output by 2028, and that capacity would sit idle if AI spending cools. Its next guide, early next year, will show whether supply is still what’s holding it back.
So what is Applied Materials stock actually worth?
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