Applied Materials Stock Continues to Slide as Analysts Update Outlook

Applied Materials Inc. (AMAT) shares extended their decline in premarket trading Friday, falling to $162.50, down 13.67% from Thursday’s close of $188.24. The semiconductor equipment giant has faced mounting pressure following its disappointing fourth-quarter guidance that cited weakening demand from China and delays in export license approvals. The stock’s continued slide reflects investor concerns about the company’s exposure to geopolitical tensions and uncertain demand patterns in key markets.

Applied Material’s Disappointing Forecast Triggers Analyst Downgrades

Applied Materials shocked investors Thursday with a fourth-quarter revenue forecast of approximately $6.7 billion, significantly below the $7.32 billion analyst consensus. The company also projected earnings of $2.11 per share, falling short of the expected $2.38. CEO Gary Dickerson attributed the weakness to reduced demand from Chinese customers and ongoing delays in export license approvals, creating what he called “a level of uncertainty” in the business environment.

The disappointing outlook prompted swift action from Wall Street analysts, with several firms adjusting their price targets and ratings. Wolfe Research lowered its price target from $230 to $200 while maintaining an Outperform rating, citing the company’s underperformance relative to peers like KLA Corporation and Lam Research. Barclays maintained its Equalweight rating with a $170 price target, highlighting the 24% quarter-over-quarter decline in Chinese revenue and expressing concerns about pending export license applications.

Needham bucked the trend by reiterating its Buy rating and $240 price target, though the firm acknowledged the significant $500 million reduction in the company’s Gate-All-Around (GAA) revenue outlook from $5 billion to $4.5 billion. The firm noted that while Applied Materials faces near-term headwinds, the long-term demand outlook for computing power remains robust, suggesting potential buying opportunities on current weakness.

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Analysts Divided Over Applied Materials’ Outlook

Despite the recent volatility, Applied Materials maintains a strong market position with a $151 billion market capitalization and solid financial metrics. The company trades at a P/E ratio of 22.9x with trailing twelve-month revenue of $28.1 billion and maintains healthy profit margins of 48%. Notably, the company has paid dividends for 21 consecutive years, demonstrating financial stability even amid current challenges.

The stock’s year-to-date performance shows a gain of 16.34%, outperforming the S&P 500’s 9.98% return, though it has declined 5.76% over the past year compared to the broader market’s 18.58% gain. The company’s five-year return of 191.12% significantly outpaces the S&P 500’s 91.78% return, highlighting its long-term growth trajectory despite recent setbacks.

Looking ahead, analysts remain divided on the company’s near-term prospects, with price targets ranging from $165 to $250. The key factors to watch include the resolution of export license issues with China, recovery in leading-edge logic demand, and the company’s ability to navigate the evolving geopolitical landscape. Management’s optimistic outlook for DRAM prospects in fiscal 2026, despite current China-related headwinds, provides some hope for recovery in the coming quarters.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.