Applied Materials (AMAT): Evaluating Valuation After Daiwa Downgrade and Mixed Post-Earnings Outlook

Applied Materials (AMAT) just wrapped up its latest earnings report, and the aftermath has sparked debate among investors weighing their next move. On one hand, revenue cleared expectations and new display technology is gaining traction with consumer device makers. On the other hand, a downgrade from Daiwa Securities quickly followed as the market digested lower earnings, cautious guidance for the next quarter, and the ongoing drag from weaker semiconductor equipment demand at major companies such as Intel and Samsung. The tension between innovation and uncertainty remains prominent, especially with China’s slowdown casting a longer shadow than many had hoped.

If you zoom out, Applied Materials has not seen significant gains recently. While long-term shareholders are still ahead, the stock has slipped about 16% over the past year, and short-term returns are flat to negative. Despite headlines about OLED momentum and the company’s late-stage investments aimed at capitalizing on AI-related growth, recent months show fading momentum as investors try to interpret mixed signals from both the industry and key end markets. The cautious outlook, along with last quarter’s earnings miss, is giving some observers pause.

After a year like this, the question remains: is Applied Materials trading at an attractive discount, or has the market already anticipated the upcoming challenges and the potential for future growth?

Most Popular Narrative: 16.3% Undervalued

According to the narrative by Unike, Applied Materials is currently considered significantly undervalued compared to its projected fair value. This perspective hinges on the company’s anticipated role in powering future semiconductor manufacturing and AI-driven chip demand.

"Catalysts
Most Immediate Catalysts (1-2 Years):
• Semiconductor Equipment Demand: As AI, cloud computing, and automotive chips grow, chipmakers (TSMC, Intel, Samsung) are increasing fab capacity, boosting demand for AMAT’s semiconductor equipment.
• AI Boom & High-Performance Computing: AI chips (from Nvidia, AMD, and Intel) require advanced manufacturing tools, where AMAT is a key supplier."

How strong are the numbers behind this bullish case? The narrative hints at remarkable revenue growth, expanding margins, and a future valuation multiple that could surprise even seasoned investors. Want to uncover the full financial roadmap and see the bold forecasts driving this undervalued call? There is more beneath the surface. Discover what powers this optimism.

Result: Fair Value of $194.11 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, export restrictions to China and the cyclical nature of semiconductor demand could still present challenges for Applied Materials’ future growth story.

Find out about the key risks to this Applied Materials narrative.

Another View: Discounted Cash Flow

Looking at Applied Materials through the lens of our DCF model offers a measured perspective. Unlike the earlier approach, the DCF analysis suggests the stock is trading slightly above its calculated fair value. Could the market be more cautious than the headlines suggest?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Applied Materials for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Applied Materials Narrative

If these takes don’t quite align with your perspective or you’re keen to investigate your own insights, you can build a custom data-driven story in just a few minutes. do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Applied Materials.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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