Key Takeaways
- UBS cut its Applied Materials target to $640 from $695 the morning after a record quarter, and kept its Buy rating.
- Analysts have raised their fiscal 2027 estimates since June, so the stock’s 47% drop has come from a lower multiple.
- $640 works out to about 27x fiscal 2028 earnings, a premium to the stock’s 21x average, so the target needs a re-rating as well as growth.
Applied Materials (AMAT) posted record quarterly revenue of $10.41 billion, up 53%. UBS cut its price target anyway.
Timothy Arcuri lowered it to $640 from $695 on Nov. 13 and kept his Buy rating. That’s still 68% above the stock’s $380.95 close on Nov. 12, which sits 47% below its June high.
Two Hits Since the Summer, and No Earnings Cut
Applied’s stock closed at a 52-week high of $723 on June 30. In mid-October, it laid out 2030 targets at an investor event but gave no forecast for next year’s chip equipment market. Then in early November, AI stocks sold off after Democrats’ gains in the midterms, and Applied went down with them.
The Nov. 12 report had plenty to prove, and CEO Gary Dickerson gave that forecast on the call: “Our current view is that wafer fab equipment demand will be up more than 30% year-over-year.” Applied also guided its fiscal first quarter to $11.1 billion of revenue, up 58%.
UBS Is Paying for Share Gains
UBS says Applied is on track to gain close to 1 point of wafer fab equipment share this year, mostly in leading-edge foundry-logic and advanced packaging. It nudged its estimates up and blamed the lower target on sharp multiple compression across the chip supply chain.
On the call, Arcuri asked whether any customer wanted its tools later than planned. Dickerson’s answer: “No, very clear. The answer is no.”
Other firms cut too that morning, from Needham’s $470 to $600 at Stifel and Bernstein. UBS’s $640 is the highest of the cuts.
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
Does UBS’s $640 Add Up?
The consensus target is $623, 64% above the price. That’s nearly triple where it stood a year ago, and just below its September peak of $641:
Estimates climbed through the selloff. When the stock peaked on June 30, analysts expected $16.40 of normalized EPS in fiscal 2027. Now they expect $18.75, and $24.07 in fiscal 2028:
So the drop is all in the multiple. Applied traded at 21x forward earnings on Nov. 12, in line with its 5-year average and down from 49x on June 30:
A year from now, investors will be pricing fiscal 2028. UBS’s $640 is about 27x that year’s $24.07, well above the 21x average, but nowhere near the summer’s 49x.
Right on Applied’s Business, Impatient on the Price
CFO Brice Hill named the main risk himself: “cleanroom capacity remains a gating factor for how much equipment the industry can consume.”
UBS has the business right. Estimates keep rising, customers want tools as fast as Applied can ship them, and the summer’s froth is gone. My issue is the multiple. At the 21x average, fiscal 2028’s estimate supports about $505, above the Nov. 12 close. Getting to $640 within a year means investors paying a premium the whole chip supply chain just lost.
Applied’s fiscal first-quarter report in February is the next check. A quarter at or above the $11.1 billion guide, with the 2027 market view intact, would make UBS’s multiple easier to accept.
So What Is Applied Materials Stock Actually Worth?
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