Applied Materials (AMAT) and Advanced Energy Industries (AEIS) were in focus on Monday as Susquehanna upgraded the pair on continued semiconductor equipment spending strength.
Applied Materials and Advanced Energy Industries were slightly higher in premarket trading.
“Recent checks suggest the [semiconductor capital equipment] industry is preparing for $120 billion [wafer fab equipment] spending,” analyst Mehdi Hosseini wrote in a note to clients. “Additionally, while supply chain bottlenecks make the path to $150 billion volatile, the bigger picture is often overlooked: with global semi revenues trending to [more than] $1 trillion, [wafer fab equipment] supply chain must prepare for spending well above $150 billion! In short, although we believe the journey toward $150 billion-plus will be choppy, the underlying fundamental trends remain strong. In our view, company-specific earnings are poised to grow at [more than] 25% CAGR, with the cycle duration extending for several years. Combined with the fact that SCE companies deliver double-digit FCF margins, we believe this also supports an uplift in valuation multiples.”
Hosseini upgraded Applied Materials to Positive from Neutral and upped his price target to $400 from $180. Advanced Energy Industries was raised to Positive from Neutral and the price target was raised to $300 from $190.
In addition to the upgrades, Hosseini raised the price targets on ASML (ASML), KLA Corp. (KLAC), Lam Research (LRCX) and Teradyne (TER).