Applied Materials Stock Rises Ahead Of Q1 Earnings After $252M Export Probe Settlement

Several Wall Street firms have raised price targets on Applied Materials ahead of earnings, with targets implying upsides in the range of 7% to 25% from the stock’s last close.

• The company reached a $252.5 million civil settlement with the U.S. Commerce Department’s Bureau of Industry and Security over China-related shipments.
• The U.S. Department of Justice and the SEC closed their investigations without taking action, ending a probe that had lingered since late 2022.
• Koyfin data shows Applied is expected to post revenue of $6.88 billion and adjusted EPS of $2.21.

Shares of Applied Materials, Inc. (AMAT) rose over 1% in overnight trading heading into Thursday as the chip-equipment maker moved into its first-quarter (Q1) earnings report with a major regulatory overhang lifted and a series of bullish analyst calls pointing to further upside.

AMAT stock rose over 3% on Wednesday to hit a 2-week high and rose marginally in after-hours trading as well.

Export Investigation Resolved Before Earnings

The company said on Wednesday that it reached a civil settlement with the U.S. Department of Commerce’s Bureau of Industry and Security, agreeing to pay $252.5 million to resolve allegations related to shipments to China between November 2020 and July 2022.

Applied said the shipments did not comply with export rules due to a misunderstanding of the regulations. Crucially, the company added that both the U.S. The Department of Justice and the Securities and Exchange Commission have closed their related investigations without taking action.

The probes had been a persistent source of uncertainty since late 2022, when Applied first disclosed receiving a subpoena tied to China-related shipments.

Wall Street View On AMAT

Several brokerages have raised price targets on Applied in recent weeks. On Monday, B. Riley raised its price target to $400 from $365, implying an 18% upside from current levels, and reiterated a ‘Buy’ rating. The firm said it expects Applied to report “strong” fiscal first-quarter results, slightly above consensus.

Last week, Citi raised its price target to $400 from $250, implying an 18% upside from the stock’s last close, and reiterated a ‘Buy’ rating ahead of the earnings release. The brokerage expects above-consensus results, pointing to “positive spending revisions from all the major foundry and memory semiconductor companies.”

Meanwhile, UBS lifted its price target to $405 from $285, implying a 19% upside from current levels, and maintained a ‘Buy’ rating. Morgan Stanley also raised its price target to $364 from $273, implying a 7% upside, and kept an ‘Overweight’ rating. The brokerage said that while concerns around the company would “still take time to dissipate,” a strong earnings report and guidance could help move the stock’s narrative in “a more constructive direction.” Morgan Stanley added that it expects Applied to guide April-quarter revenue growth of 3%-4%, compared with Street expectations of about 2%.

AMAT Q1 Earnings Preview

According to Koyfin data, Applied Materials is expected to report Q1 revenue of $6.88 billion, up from $6.8 billion in the prior quarter. Earnings before interest, taxes, depreciation, and amortization (EBITDA) are forecast at $2.13 billion, compared with $2.06 billion previously, while earnings before interest and taxes (EBIT) are expected to rise to $2 billion from $1.95 billion.

GAAP earnings per share are projected at $2.15, down from $2.38 in the prior quarter, while adjusted earnings per share are expected to tick up to $2.21 from $2.17.

Koyfin data shows 27 of 38 analysts rate the stock ‘Buy’ or ‘Strong Buy’, 10 rate it ‘Hold,’, and 1 rate it ‘Strong Sell’ with no ‘Sell’ ratings. The 12-month average price target stands at $335.21, slightly below the current price, while the highest target of $425 implies about 25% upside from Wednesday’s close.

How Did Stocktwits Users React?

On Stocktwits, retail sentiment for AMAT was ‘neutral’ amid ‘high’ message volume.

One user said, “After last earnings selloff and rebound, I would expect this to see 365 by Friday. If somehow it sells off I’m buying the dip for a rip. Txn number took it to new highs. I expect the same here.”

Another user said, “Looking good out there today. Keep the focus: discipline over emotion, process over outcome.”

AMAT stock has risen 87% over the past 12 months.

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