Applied Materials Shares Drop Due to Poor Forecast and Challenges in China

Applied Materials Inc. Sees Sharp Drop in Shares

Shares of Applied Materials Inc. (NASDAQ: AMAT) fell significantly on Friday after the company disclosed its financial results for the third quarter following the market close on Thursday.

The chip manufacturing firm reported a revenue of $7.3 billion for the third quarter, which surpassed analysts’ expectations. Adjusted earnings came in at $2.48 per share, while analysts had predicted $2.36.

Bryce Hill, the Senior Vice President and CFO, remarked, “We anticipate a drop in sales due to fourth-quarter capacity usage and varying demand from advanced clients, influenced by market concentration and fab schedules.”

He added, “We are managing and adjusting to immediate uncertainties by utilizing our strong supply chain, extensive manufacturing resources, and deep customer connections.”

Looking ahead, Applied Materials projects fourth-quarter revenue to range around $6.7 billion, with a potential variation of $500 million either way. For adjusted earnings, the expectation is between $1.91 and $2.31 per share.

Reactions among analysts regarding Applied Materials were somewhat mixed. UBS kept a neutral rating but lowered its price target from $185 to $180. On the other hand, Wells Fargo maintained its overweight rating while adjusting its target from $215 to $205.

Canter Fitzgerald also retained its overweight rating, decreasing its target from $220 to $200. Meanwhile, Morgan Stanley held a similar weight rating but raised its target from $169 to $172.

JP Morgan reiterated its overweight stance and increased its target from $210 to $220. Conversely, Stifel reduced its target from $195 to $180 while maintaining a bullish outlook, and Wolf Research kept its outperform rating but lowered its target from $230 to $200.

Mizuho also maintained an outperform rating but dropped its target from $220 to $200. Evercore ISI repeated its outperform rating and kept its goal at $209, whereas Bank of America Securities downgraded the stock from buy to neutral, cutting its target from $190 to $180.