UBS Reiterates Buy on Applied Materials (AMAT)
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UBS reiterated a Buy rating and $35.00 price target on Applied Materials (NASDAQ: AMAT) following results from proprietary fab tracker. The tracker showed the incumbent China semiconductor fabs made total semicap purchases totalling $330M last month. This amount is relatively in line with the monthly average so far this year.
Analyst Stephen Chin commented, "We keep a Buy rating as we remain comfortable with our upside case of some semicap sales to indigenous China fabs in the next few years. Our most recent proprietary China fab tracker still showed no meaningful semicap equipment purchases by any of the big 5 indigenous China customers (XMC, Hualai, Sanan, Jinhua or HH-Grace). We estimate the indigenous China fabs combined semicap purchases were under $20M last month. The fab that we are still tracking most closely is XMC who has targeted spending $8B in capex if it builds a new 100k capacity NAND fab. While we have seen no meaningful semicap purchases from XMC, our monthly tracker did show that XMC just increased its purchases of raw 300mm wafers. We estimate XMC purchased 35k wafers last month which is higher than the nameplate capacity at its existing memory fab at 30k and its 2014-15 average of only 20k. We are not sure yet if this is normal raw wafer inventory management or some test wafers for testing a new 3D-NAND process. We continue to look for more signs that XMC is actually building a facility for a new megafab as a potential catalyst to our AMAT upside case of $44."
Shares of Applied Materials closed at $29.94 yesterday.
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