Applied Materials' fourth-quarter guidance came in well ahead of expectations. Management is looking for revenue of $3.85 billion to $4 billion and earnings of 86 cents per share to 94 cents per share. Analysts were only looking for sales of $3.71 billion and earnings of 82 cents per share.
TheStreet's Eric Jhonsa pointed out the strength in sales to DRAM and OLED makers during the quarter. TheStreet's founder Jim Cramer, who also manages the Action Alerts PLUS charitable trust portfolio, also talked about DRAM, saying pricing looks strong based on Cisco Systems' (CSCO) - Get Reportrecent earnings report.
Adding insult to injury, AMAT stock fell 3% in Thursday's regular trading session, so despite a strong earnings report and better-than-expected guidance, the stock is doing little more than making up the losses it suffered Thursday.
Even worse though, the analysts are backing the name and it's still having trouble gaining momentum.
Stifel analyst Patrick Ho said the company reported a "stellar" result and that AMAT could have a record year in 2018. As a result, he reiterated his buy rating and increased his price target to $61 from $55, implying about 42% upside.
That's a big increase, but Credit Suisse's Farhan Ahmad outdid Ho by a buck, maintaining his outperform rating but assigning a $62 price target instead. Margins are expanding, growth is becoming more consistent and Applied Materials is buying back stock, he reasoned. As a result, AMAT stock deserves a higher valuation.
Also this morning, Craig-Hallum analyst Christian Schwab raised his price target to $60 from $53 as well.
To recap, AMAT beat earnings and revenue expectations, posted better-than-expected guidance, and has three analysts calling for ~40% gains. Doesn't sound too bad.
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This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.