Nomura Securities Downgrades Applied Materials (AMAT) to Neutral on TEL Deal Termination

Nomura Securities downgraded Applied Materials (NASDAQ: AMAT) from Buy to Neutral with a price target of $22.00 (from $30.00) after the company and Tokyo Electron terminated their merger agreement.

Analyst Romit Shah commented, "We had been bullish on Applied Materials. Our thesis was that the TEL merger would boost shares into the $30–35 range based on $2.00 in earnings and a mid- to high-teens multiple. However, yesterday’s announcement of a breakup changes everything. We believe earnings power is now around $1.50 and that shares will be stuck in the $20–23 range. Overall, we see EPS at $1.35 to $1.55 with a bias towards the low-end, given the current spending environment and increased execution risk associated with merger falling through. We are assuming that Applied will trade in line with its historical relative multiple or 15x CY16 EPS range of $1.35–1.55. On this basis, we are lowering our target from $30 to $22."

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 $19.97 yesterday.

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