RBC Capital Initiates Applied Materials at Outperform

RBC Capital analyst Srini Pajjuri initiated coverage of Applied Materials (NASDAQ: AMAT) with an Outperform rating and a price target of $385.00.

“AMAT outperformed the SOX index but lagged US equipment peers last year due to China headwinds, weaker mature node (ICAPS) spending, and possibly some share shifts.

We are positive on wafer fab (WFE) spending and expect AMAT to grow at least in line in the next 12 months.

AMAT has a particularly strong position in DRAM where we expect spending to outpace overall WFE. Other secular tailwinds include transition to backside power, hybrid bonding, and 4F 2 /3D transistors.

At 30x P/E, valuation is at a 20% discount to SemiCap peers which we think makes risk/ reward particularly attractive. Initiate at Outperform.”

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