Applied Materials (AMAT) Stock Forecast & Price Target

Applied Materials is recognized as the largest semiconductor wafer fabrication equipment manufacturer globally, benefiting from its substantial market share in the deposition segment, vital for layering materials on semiconductor wafers. Despite a modest 3% year-over-year growth in China revenue for CY24, the potential for accelerated WFE spending in CY25-26 indicates a favorable trajectory for long-term profitability and revenue peaks. Moreover, Applied's projected 15% year-over-year growth in ex-China revenue, contrasted with its peers' higher growth rates, highlights the company’s strategic positioning to outpace a mid-single-digit growth benchmark in the sector.

Applied Materials is experiencing challenges that contribute to a negative outlook on its stock, primarily driven by declining revenue from its significant dependence on the Chinese market, which is expected to contribute only 26% to total revenue in the upcoming quarter, down from 31%. The company's order backlog has been reduced by $549 million, indicating potential issues in demand, and revenue growth forecasts have been muted, with expected declines in specific segments such as semiconductor equipment and display revenues. Furthermore, concerns regarding future market conditions, including weak projections for wafer fabrication equipment (WFE) and a decline in market share, particularly in the absence of participation in the NAND sector, exacerbate the pessimistic outlook.