Applied Materials (AMAT) Tests Resistance as Analyst Raises Price Target to Street High

Applied Materials' stock (AMAT) is experiencing heightened activity as the stock price surpassed the $200 mark, fueled by an analyst upgrade and increased optimism surrounding the wafer fabrication equipment (WFE) market. This surge represents the highest closing price since October 14th, 2024, and contributes to a year-to-date gain of 23%.

The stock's performance reflects a broader positive sentiment toward the semiconductor industry and Applied Materials' strategic positioning within it.

Morgan Stanley analyst Shane Brett upgraded Applied Materials to “Overweight” from “Equal Weight,” raising the price target from $172 to $209. This upgrade is predicated on a revised forecast for the WFE market in 2026, projecting a 10% year-over-year growth, up from the previous estimate of 5%.

The firm's revised estimates also elevated calendar year 2026 EPS for Applied Materials, KLA Corp. (KLA), and Lam Research (LRCX) by 5%-9%. The analyst believes that Applied Materials has significant leverage in greenfield DRAM projects, reducing risks associated with China, ICAPS and leading-edge logic.

Other financial institutions have also adjusted their ratings and price targets for Applied Materials. Jefferies upgraded the stock to “Buy” with a price target of $195 in March, while KeyCorp initiated an “Overweight” rating with a price target of $225 in January. These positive ratings collectively contribute to a bullish outlook for the company's stock.

In April, Applied Materials made a strategic investment by acquiring a 9% stake in BE Semiconductor Industries (BESI), becoming its largest shareholder. BESI specializes in advanced semiconductor packaging tools, including hybrid bonding technology, which is crucial for vertically stacking chips. This investment underscores Applied Materials' focus on enhancing its capabilities in advanced chip technologies.

However, the company is facing legal challenges. Beijing E-Town Semiconductor Technologies filed a lawsuit against Applied Materials in August, alleging misappropriation of trade secrets related to plasma sources and wafer surface treatment technologies.

The Chinese company is seeking damages of approximately $13.94 million. This legal action introduces potential risks and uncertainties, particularly concerning Applied Materials' operations and partnerships in China.

The recent analyst upgrade and positive stock performance reflect a favorable view of Applied Materials' prospects. However, the ongoing legal challenges and geopolitical factors, such as potential export restrictions, present risks that markets will be monitoring closely. The ability of Applied Materials to navigate these challenges and capitalize on the growth opportunities in the WFE market will likely determine the future trajectory of its stock.