How High Can Applied Materials Go After Recent 37% Jump in 2025?

If you’re holding Applied Materials or considering a buy, you’re probably asking yourself the same thing as everyone else: how much higher can this stock go? It seems like every month brings another reason for investors to pay attention, with the company’s share price up an impressive 7.2% over just the past week, 26.3% in the last month, and a staggering 37.3% year-to-date. Even stretching back five years, Applied Materials has delivered a jaw-dropping 285.9% return, handily outpacing the broader tech sector.

This momentum is not just random luck. The increased global investment in semiconductors and new supply chain strategies have kept Applied Materials front and center as a beneficiary of long-term chip demand, fueling optimism and, at times, recalibrating risk perception around the stock. As a result, investors have clearly not been shy about bidding the price up, reaching $224.99 at the most recent close.

But with a run like this, the pressing question is whether Applied Materials is still undervalued, fairly priced, or starting to look a bit expensive. When it comes to valuation, it is a mixed bag. The company currently scores a 3 out of 6 on our value checks, meaning it looks undervalued by half the measures we track. Let’s break down those common valuation approaches and see how Applied Materials stacks up before we get into the smarter, bigger-picture way to size up its worth at the end of this article.

Why Applied Materials is lagging behind its peers

Approach 1: Applied Materials Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's intrinsic value by forecasting how much cash the business is expected to generate in the future and then discounting those projected cash flows back to today's value. This provides an estimate of what the company is truly worth based on its ability to generate cash.

For Applied Materials, the most recent Free Cash Flow stands at $6.3 Billion. Analyst forecasts project ongoing growth, with Free Cash Flow expected to rise to $9.5 Billion by fiscal year 2029. While analysts typically estimate up to five years ahead, further projections beyond 2029 are based on longer-term growth rates to account for future performance.

Based on these projections, the DCF model calculates an intrinsic fair value of $161.92 per share. With the current share price at $224.99, this represents an implied premium and suggests the stock is 39.0% above its estimated intrinsic value on a DCF basis.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Applied Materials.

Our Discounted Cash Flow (DCF) analysis suggests Applied Materials may be overvalued by 39.0%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Applied Materials Price vs Earnings

When analyzing profitable companies like Applied Materials, the Price-to-Earnings (PE) ratio is often the preferred valuation metric because it offers a quick sense of how much investors are paying for each dollar of current earnings. It is especially relevant for mature, consistently profitable firms, as it helps investors gauge whether expectations for future growth and risk are adequately reflected in the share price.

A "normal" or "fair" PE ratio is shaped by factors such as a company's expected earnings growth, overall industry performance, and risk profile. Fast-growing companies or those with lower risk typically justify higher PE multiples, while those facing uncertainties tend to trade at lower multiples.

Currently, Applied Materials trades at a PE ratio of 26.2x. This is well below both the average for its Semiconductor industry peers at 35.9x and the peer group average of 35.3x. At first glance, this suggests the stock is cheaper than the broader industry.

However, Simply Wall St’s proprietary "Fair Ratio" takes the analysis a step further by factoring in Applied Materials' unique growth prospects, profitability, industry dynamics, market capitalization, and risk. This advanced approach tends to provide a more tailored valuation than simply comparing with peers or the sector alone. For Applied Materials, the Fair Ratio stands at 32.3x, meaning the stock would be fairly valued if it traded around this level given its fundamentals.

With the company’s actual PE multiple of 26.2x notably lower than the Fair Ratio, Applied Materials appears undervalued by this measure, suggesting potential upside if the market were to appropriately price in its prospects.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Applied Materials Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is simply your perspective, your story, about where a company like Applied Materials is headed, backed by your own estimates for its future sales, profits, and margins, and how that supports your view of fair value. Narratives connect the dots between what a business does, how you think it will perform financially, and what you believe the stock should be worth.

Using Narratives on Simply Wall St’s Community page is easy, and millions of investors already use them to clarify their investment thinking. Narratives help you decide when to buy or sell by comparing your fair value, based on your assumptions and forecasts, to the current share price. Even better, if you or others update a Narrative in response to new developments, such as earnings releases or industry news, your fair value adjusts automatically so you always have the most relevant view.

For example, if you are optimistic about AI and see Applied’s revenue and margin expanding sharply, your Narrative might justify a fair value of $240 per share; meanwhile, a more cautious investor worried about China risks and cyclical swings may set a fair value closer to $160. Narratives let investors of all experience levels turn their research into actionable insights.

Do you think there's more to the story for Applied Materials? Create your own Narrative to let the Community know!

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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