AMAT Stock Price Gaps Down As Analysts Drop Targets On Earnings

Applied Materials' stock price (NASDAQ: AMAT) gapped down on the open today, starting out at $204.95, having closed yesterday's session up at $211.83. Earnings beat on both EPS and revenue, yet analyst adjustments have been to the downside.

This downward movement was triggered by four analyst downgrades coming in, along with the fact that the stock had run up 11% over the preceding 5 trading sessions. An element of over-expectations added to the mix.

The analysts to trim include

• Stifel – $270 from $275
• Wells Fargo – $260 from $280
• Deutsche Bank – $230 from $260
• B Riley – $280 from $300

With AMAT trading under $210, each of the downside revisions leave plenty of upside potential. It is no surprise then that despite the price target cut, B. Riley maintained a buy rating on the stock.

So what of earnings then?

Applied Materials reported numbers that exceeded expectations, posting a $2.12 EPS for the quarter against the consensus estimate of $2.02. Revenues also came in over expectations, with $6.78B for the Q $100 million above consensus. With a commendable net margin of 27.57% and a return on equity of 41.22%, the company's financial health seems robust.

As far as outlook, the next quarter is in part responsible for the shift in sentiment. With the consensus $6.96 billion, the company was quoted as saying “the fourth quarter of fiscal 2024, Applied expects net revenue to be approximately $6.93 billion, plus or minus $400 million. Non-GAAP diluted EPS is expected to be in the range of $2.00 to $2.36.” EPS was pegged at $2.19, so slightly above the midpoint of the provided range.

Furthermore, the company has announced plans to reward its shareholders with a quarterly dividend of $0.40, slated for payment on September 12th. The dividend yield stands at 0.79%, supported by a dividend payout ratio of 18.39%. Applied Materials’ commitment to delivering shareholder value is evident from these distributions, amid their role as a pivotal player in manufacturing equipment, services, and software for key high-tech industries, including semiconductor and display sectors.

As the market processes the implications of analysts' shifting targets, and a revised outlook, there will likely be plenty of interested watchers.