Tax Inversion Rules Not Expected to Have Major Impact on Applied Materials (AMAT) Merger - Cowen

Cowen and Company maintains an Outperform rating and $26 price target on Applied Materials (Nasdaq: AMAT) following issuance of new tax inversion rules introduced by the U.S. Treasury on Monday.

Analyst Timothy Arcuri sees the key benefits of the Applied Materials/TE Connectivity (NYSE: TEL) remaining intact. The analyst commented, The new rules should not impact its ability to drive lower GLOBAL tax rate, while our experts believe future cash flows will still be largely available for capital return. Separately, we feel as confident as ever in deal closure, but logistics may drive another delay into CQ1.

Arcuri also updated other thoughts on the AMAT/TEL deal, seeing the transaction close in early 2015 now. The analyst said, Totally separate from this event, our work around the deal continues to support a high degree of confidence in closure, albeit we do see more potential delays beyond its stated CQ4 timing. We now feel it is likely that the deal will not close until CQ1 owing more to some logistical delays that we sense could arise from conditional approvals including, but not limited to, sale of business, etc. ... Net/net, the stock has been by far the worse performer in the group over the past 3mos (+3.5% vs. ASML +22%, KLAC +12%, LRCX +8%) so we feel much of this is already priced in and we continue to like our $26 target.

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

Applied Materials closed at $21.94 yesterday.

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