UPDATE: JPMorgan Downgrades Applied Materials (AMAT) to Underweight; Short Into Earnings Season

January 7, 2013 7:39 AM EST
Get Alerts AMAT Hot Sheet
Price: $34.15 +1.19%

Rating Summary:
    24 Buy, 4 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 18 | Down: 18 | New: 11
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(Updated - January 7, 2013 11:14 AM EST)

Shares of Applied Materials (NASDAQ: AMAT) are up 18 percent from their recent bottom but one analyst thinks this run-up provides a shorting opportunity as they believe shares will be heading right back down.

JPMorgan's Christopher Blansett downgraded Applied Materials from Neutral to Underweight Monday while maintaining its downside price target of $10.

"We think the recent run-up in the stock is a near term short opportunity as we think the upcoming earnings season and associated 2013 capex guidance by major semi device makers will be negative for AMAT and the SemiCap sector as a whole," the analyst said.

The firm anticipates a modestly improved revenue outlook in C1Q13 for equipment suppliers. However, they believe we may see a 'U' or 'W' shaped semi capex trough due to a soft C2Q13 outlook and they continue to believe overall semi capex will be down 10-15% in 2013.

They believe AMAT and other large cap SemiCap stocks are currently disconnected from the deteriorating industry outlook and recommend long only investors trim existing positions or recommend short investors take positions ahead of earnings season.

AMAT is also trading at a rich valuation when compared with others in the group, the firm notes. On a P/TBV basis AMAT trades at 7.6x vs. our SemiCap group avg. of 2.8x. This is the largest disconnect they see in terms of valuations.

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 $11.81 yesterday.

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