Applied Materials (AMAT): Derivative Call From Strong Outlook - Needham

Needham & Company analyst, Edwin Mok, reiterated his Buy rating on shares of Applied Materials (NASDAQ: AMAT) along with the price target of $34 but highlighted derivative calls from the company's strong outlook.

The strong guidance for F4Q16 (Oct) and upbeat commentary on bookings strength suggest continued robust demand in the SemiCap space going well into CY2017. Management raised the Wafer Fab Equipment (WFE) industry outlook for CY2016 and expects growth in CY2017, driven by ongoing investments in 3D NAND by multiple customers, foundries investing in both leading-edge 10/7nm and trailing-edge capacities, some recovery in DRAM spending, and potential upside coming from new market entrants in China. Similar to AMAT's last report in May, the analyst believes this report acts as a catalyst for the group, alleviating investor doubt on the sustainability of strengthened fundamentals.

SemiCap stocks and the SOX are up 18.8% and 19.1% YTD on average, outpacing the S&P 500 (up 7.0%), but he expects the group to continue to trade higher.

For an analyst ratings summary and ratings history on Applied Materials click here. For more ratings news on Applied Materials click here.

Shares of Applied Materials closed at $27.68 yesterday.

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