Shares of Applied Materials (AMAT) rallied in morning trading after the company reported better than expected adjusted earnings per share for its fiscal third quarter and provided an upbeat outlook for the fourth quarter. Following the quarterly release, multiple analysts maintained bullish views on the stock and many raised their respective price targets on the shares.
EARNINGS/GUIDANCE: After the market close yesterday, Applied Materials reported Q3 adjusted EPS of 50c, beating analysts' estimates of 48c. The company's revenue of $2.82B fell just shy of analysts' estimates of $2.84B. The company said that new orders for the quarter increased 6% sequentially to $3.66B and that backlog rose 19% sequentially to $4.95B. Looking ahead, Applied Materials guided for Q4 adjusted EPS in the range of 61c-69c, well above analysts' estimates of $2.87B, and sequential net sales growth of 15%-19%.
STREET RESEARCH: Following the earnings report, Cowen analyst Timothy Arcuri backed an Outperform rating on Applied Materials and raised his price target on shares to $32.50 from $26, saying that, while there appears to be a near-term peak in quarterly EPS, the firm has seen for at least 15 years multiple growth vectors and "second to none" execution. Needham analyst Y. Edwin Mok affirmed a Buy rating on the stock and upped his price target to $34 from $29, saying that the "strong" Q3 and "substantially higher" guidance was driven by growth in the SemiCap and Display businesses. The analyst added that he sees more upside to share price due to a "substantial" increase in forward earnings estimates. UBS analyst Stephen Chin also reiterated his Buy rating while raising his price target on shares to $35 from $28.50, citing "record" quarterly orders that appear to be sustainable for a few more quarters. The analyst noted that the EPS beat was mostly from a lower tax rate than was previously expected, but that he does not believe this will not materially impact the company's U.S. cash position or its $3B stock buyback program. Craig-Hallum also backed a Buy rating on the stock and raised its price target to $36 from $30, with analyst Christian Schwab noting that Applied Materials is "well positioned" to benefit from multiple multi-year technology inflections. In addition, Davidson analyst Thomas Diffely maintained a Buy rating and raised his price target on the stock to $36 from $32, while Stifel analyst Patrick Ho also backed a Buy rating on the shares.
PRICE ACTION: In late morning trading, Applied Materials rose 6.72% to $29.54. Shares are up over 58% year-to-date.
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