Shares of Applied Materials (AMAT) reached a record high of approximately $331 this week, driven by a significant rally in the semiconductor sector following strong earnings from peer company Taiwan Semiconductor (TSMC). With TSMC projecting its capital expenditures to hit a remarkable $54 billion this year, the outlook appears increasingly positive for Applied Materials, a key supplier of semiconductor manufacturing equipment.
The surge in Applied Materials’ stock, which has increased by an impressive 165% from its 52-week low, reflects broader industry optimism. Analysts from KeyBanc Capital Markets, led by Steve Barger, foresee further growth for AMAT as they predict the stock will continue to ascend significantly through 2026. Barger emphasized the company’s strong position in the conventional DRAM market, identifying it as “arguably the artificial intelligence (AI)-related device facing the most scarcity.” He believes this scarcity will compel companies to invest in capacity expansion, thereby fostering a sustainable long-term rally for Applied Materials.
Analysts Raise Price Targets
This bullish sentiment is further supported by KeyBanc’s recent increase of its price target for Applied Materials to $380, which suggests an upside potential of about 15% from current levels. Besides its involvement in memory chips, Applied Materials’ robust exposure to logic chips positions the company to capitalize on the ongoing AI buildout expected in the coming years.
Despite its strong performance, Applied Materials is currently trading at a forward price-earnings (P/E) ratio of just over 30x, which is notably lower than competitors like KLA Corporation (KLAC) and Lam Research (LRCX), both trading above 40x. This pricing presents a compelling opportunity for investors looking for value in the semiconductor sector.
Historically, Applied Materials has demonstrated a tendency to perform well during February, averaging a rally of approximately 5.76% over the past 16 years. This seasonal trend adds another layer of intrigue for potential investors considering the stock in the near term. Additionally, AMAT shares offer a dividend yield of 0.58%, which may appeal to income-focused investors.
Wall Street Consensus on Applied Materials
Other analysts on Wall Street are echoing the optimistic outlook for Applied Materials. According to data from Barchart, the consensus rating for AMAT shares is currently classified as a “Moderate Buy,” with price targets reaching as high as $425. This indicates a potential upside of approximately 23% from the recent trading levels.
As the semiconductor industry continues to evolve, the prospects for Applied Materials appear bright. With strong historical performance, a diversified product portfolio, and favorable market conditions, the company is positioned to thrive in an increasingly competitive environment.
