Assessing Applied Materials (AMAT) Valuation After Analyst Upgrades and Record AI-Driven Revenue Growth

Applied Materials (AMAT) has moved back into the spotlight after a run of upbeat analyst calls tied to the accelerating AI chip buildout, Micron’s bullish forecast, and the company’s record annual revenue performance.

See our latest analysis for Applied Materials.

Despite the latest pullback, with a 1 day share price return of minus 4.08 percent and a 7 day share price return of minus 9.77 percent, Applied Materials is still riding strong AI infrastructure momentum. This is reflected in a 90 day share price return of 30.83 percent and a three year total shareholder return of 140.85 percent.

If Applied Materials has sharpened your interest in AI infrastructure, now could be a good time to explore other potential winners using high growth tech and AI stocks.

Yet with the stock up more than 50 percent over the past year and now sitting only a few percent below the average analyst target, investors face a key question: is there still a buying opportunity, or is future growth already priced in?

Most Popular Narrative Narrative: 10% Undervalued

With the narrative fair value sitting just above Applied Materials last close, the implied upside hinges on durable growth and higher long term profitability.

The packaging segment is on track to more than double to over $3B in annual revenue in the next few years, which will meaningfully boost recurring revenue and expand overall net margins given the higher margin profile of these offerings.

Read the complete narrative.

Curious how modest growth assumptions, rising margins, and a richer future earnings multiple all combine to justify that valuation gap? The narrative spells it out.

Result: Fair Value of $248.44 (UNDERVALUED)

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

However, persistent China export uncertainties and heavy reliance on a few leading chipmakers could quickly challenge those growth and valuation assumptions.

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

Another Angle on Value

While the narrative model sees around 10 percent upside, our DCF model is more conservative, suggesting AMAT is trading above its fair value of $156.75. If cash flows are closer to this slower growth path, is the current price leaving much margin for error?

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 916 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 you see the story differently and want to dig into the numbers yourself, you can build a custom view in just minutes: Do it your way.

A great starting point for your Applied Materials research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

Before you move on, put the momentum of your AMAT research to work by lining up your next opportunities with targeted screeners built around real fundamentals.

• Capture potential multi baggers early by scanning these 3629 penny stocks with strong financials that already show strong balance sheets and improving business quality.
• Target the next wave of AI infrastructure growth by focusing on these 24 AI penny stocks that pair powerful technology with compelling financial profiles.
• Lock in value now by hunting through these 916 undervalued stocks based on cash flows where prices sit below what their cash flows suggest they are truly worth.

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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