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Applied Materials Stock Up; JPMorgan Likes Chip-Capital-Spending Outlook

Applied Materials should benefit as 'semiconductor capital spending environment remains constructive,' JPMorgan says.

Applied Materials  (AMAT) - Get Applied Materials, Inc. Report "remains laser-focused on meeting its target financial model," according to JPMorgan analysts, who reiterated their overweight rating on the semiconductor-equipment giant.

Shares of the Santa Clara, Calif., closed up 1% to $134.60. The stock more than doubled from its 52-week low around $57 late last October to its 52-week high of $146 in early April. 

Analyst Harlan Sur, who has a $173 price target on the company, said in a research note that  "the semiconductor capital spending environment remains constructive."

Sur also said "a combination of market-share gain...incremental revenue opportunity, broader product portfolio, increased penetration with existing customers, increased wafer capital intensity at Foundry/Logic/Memory, and exposure to the fast-growing display market will drive growth for AMAT over the next two to three years."

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The analyst said the company hosted a “Process Control and AppliedPRO (process recipe optimization) Master Class.” The event highlighted its e-beam inspection/metrology solutions as well as its efforts to integrate artificial intelligence/machine learning across its portfolio.

Applied Materials indicated that several major technology inflections in the industry are driving the increasing need for e-beam technology, "which offers higher resolution to meet the need for greater precision, particularly in metrology," Sur said.

Late last month, New Street Research downgraded Applied Materials to neutral from buy on "tactical” concerns, while affirming its $140 price target.

While the company's valuation “is still very reasonable” based on the iShares Semiconductor ETF  (SOXX) - Get iShares PHLX Semiconductor ETF Report index, New Street analysts said, "we don’t see a near-term catalyst for a rerating."