Wolfe Research Raises Applied Materials Price Target to $550

Wolfe Research analyst Chris Caso raised the price target on Applied Materials (NASDAQ: AMAT) to $550.00 (from $500.00) while maintaining an Outperform rating.

“AMAT posted a strong report and guidance, reporting AprQ revenue 3% above Street expectations, and guided JulQ up 13% q/q, 10% ahead of consensus.

For CY26, AMAT raised revenue guidance to 30%+ y/y growth from prior 20%+ guidance.

While customers are still constrained by clean room space, upside was driven by customers creatively making additional space available.

AMAT also raised service revenue expectations to mid-teens growth longer term (from prior doubledigit growth), with higher growth near term as tight supply drives service revenue.

AMAT’s guidance is ahead of the 27% y/y WFE growth noted by LRCX.

AMAT’s revenue grew slower than WFE last year (we believe mainly due to China), with growth now driven by advanced logic, DRAM and advanced packaging, this demonstrates that AMAT can grow faster than the industry when growth is driven by those segments – which are the most important long term.

Looking forward, AMAT declined to comment on CY27 other than to say they expect it to be a strong growth year. They however expect CY28 to be a growth year as well.

Ultimately, we think CY27 will be mainly driven by customers’ ability to make new clean room space available.

Our own DRAM [link] and TSMC [link] analysis suggest that demand will exceed supply at least through the end of CY28, which we believe drives the likelihood of very strong growth in CY28 as well.

Our CY26 Rev/EPS moves to $36bn / $13.37 (assuming 32% y/y systems growth), and our CY27 rev / EPS moves to $44bn / $17.28 (25% y/y systems growth).

We do see upside potential to CY27, though we think the ultra-bull case of $200bn CY27 WFE (suggesting 40%+ y/y growth) is too aggressive, simply because the space isn’t available.

That doesn’t bother us, since unfulfilled demand in CY27 will most likely be fulfilled in CY28. In the meantime, AMAT trades at 25x our CY27 EPS, still a discount to peers despite a 70% YTD gain.

We don’t see any reason for that discount, which is why AMAT is our favorite SCE stock.”

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