Citi analyst, Atif Malik, reiterated his Buy rating on shares of Applied Materials (NASDAQ: AMAT) and increased his price target to $50 after updating his industry forecast from the prior $40B WFE spend expected in C18 to $43B which amounts to 7% growth on higher 3D NAND investment expectations.

Recent conversations with memory and equipment suppliers suggest new or greenfield 3D NAND fab investments at Samsung (Pyungtaek potentially Xian), SK Hynix (M14), Toshiba (Fab 6) and others to remain elevated in C18 given 50% reduction in 2D installed base output and lower 3D manufacturing yields offset partially by 2-3x higher bits per wafer. Transition to 96L and stacked approaches would require higher investments on manufacturing challenges.

Combined, these issues lead the analyst to increase his C17 / C18 WFE outlook to $40B / $43B from $38.5B / $40B or significantly above Street’s $38B / $39B expectations.

The PT of $50 is based on 14x C18 EPS of ~$3.60. The analyst notes that AMAT has traded in the 10-12x P/E range in last three years but he believes a 14x P/E multiple is justified given strong management execution, higher exposure to 3D NAND/Chinese spending cycles, and growing sales diversification in OLED display biz.

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 $43.44 yesterday.