Novellus

(NVLS)

could be the disproportionate beneficiary of any good news in an upcoming earnings report from

Applied Materials

(AMAT) - Get Report

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, a Goldman Sachs analyst argued Monday.

James Covello upgraded the shares to outperform, citing the possible benefit of Applied Materials' Aug. 12 earnings. Covello noted that since July 1, Novellus' stock has underperformed Applied Materials by more than 20%.

"As investors gain more confidence in the sector, they are likely to look at Novellus, hoping that underperformance is set to reverse, as many of the issues underlying recent weakness have been addressed," Covello noted. The shares could also get a push from Novellus' own midquarter update due Aug. 28.

Among the positive factors boding well for the stock, Covello argued, include exposure to growth customers like Samsung, resolved uncertainty about bookings and an off-balance-sheet synthetic lease, and diminishing concerns that a new electroplating tool from Applied Materials represented a major threat to Novellus.

"Our analyst thinks this is not a concern for Novellus since the electroplating business is likely to grow enough to offset any reduction in market share," Goldman said.

Novellus shares were recently up 67 cents, or 1.9%, to $36.37.