UPDATE: KeyBanc Starts Applied Materials (AMAT) at Sector Weight
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KeyBanc analyst Steve Barger initiates coverage on Applied Materials (NASDAQ: AMAT) with a Sector Weight rating.
The analyst comments "We think AMAT will benefit from secular trends driving increased semi content and higher chip performance requirements across a growing array of applications. In general, we think investors should take a positive and opportunistic bias toward Semicap Equipment OEMs. Looking at the semiconductor demand environment, we expect persistent end market tailwinds could result in shorter and smaller variances around longer multiyear trends vs. past cycles. In that context, we think AMAT’s strategy and position could result in lower revenue and EPS cyclicality than some investors expect. Specifically, we think its PPACt playbook and differentiated materials innovations should drive growth as customers seek to mitigate decreasing shrink efficiency in NAND, DRAM, and Logic. Additionally, we think AMAT’s strong position in leading edge, ICAPS, process control, and packaging make it relatively agnostic to customer mix, while its growing recurring revenue stream should further improve visibility. Those market and operational dynamics should be augmented by its sizable FCF and commitment to its share buyback program. As the cycle matures following multiple record years, however, even if our view toward reduced financial volatility is correct, it may not extend to share price performance if investors don’t appreciate AMAT’s increased durability relative to what could be a shallower industry moderation. We initiate coverage with a Sector Weight rating."
Shares of Applied Materials closed at $139.29 yesterday.
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