Citigroup: Applied Materials removed from focus list; target price lowered to $205.

Citigroup: Applied Materials removed from focus list; target price lowered to $205.

Citigroup has removed Applied Materials (AMAT) from its focus list and lowered its target price to $205, citing concerns about the semiconductor equipment maker's exposure to China and uneven spending in advanced foundry and logic segments [1]. The move follows a recent earnings report where AMAT forecast fourth-quarter revenue and profit below estimates, attributing the shortfall to weak demand in China and erratic orders from customers facing uncertainty due to tariffs [2]. The stock fell 14.25% to $161.42 in premarket trade following the announcement.

Citigroup's decision reflects broader challenges in the semiconductor equipment sector, where demand for AI and high-performance computing remains robust but is tempered by supply chain bottlenecks and inventory corrections. Competitors like KLA Corporation and Lam Research are also navigating similar dynamics, though AMAT's leadership in AI infrastructure technologies like Gate-All-Around (GAA) transistors, High-Bandwidth Memory (HBM), and 3D packaging positions it for long-term growth [3].

Despite the near-term headwinds, AMAT's long-term fundamentals remain strong. The company generated $1.57 billion in operating cash flow in Q2 2025 and returned $2 billion to shareholders via buybacks and dividends. Its 21-year dividend history and aggressive share repurchase program underscore its commitment to shareholder value [3]. Additionally, AMAT's diversified portfolio reduces reliance on any single market, providing a margin of safety in volatile environments.

However, investors should monitor key risks, including geopolitical tensions, inventory corrections, and competitive dynamics. The recent selloff presents a potential entry point for investors with a multi-year horizon, but the path to recovery may be bumpy. As the semiconductor industry transitions to next-gen technologies, AMAT is well-positioned to emerge as a key beneficiary, provided investors can stomach the near-term turbulence.

References:
[1] https://www.tradingview.com/news/reuters.com,2025:newsml_L6N3U70C5:0-street-view-china-hurdles-impact-applied-materials-but-outlook-remains-strong/
[2] https://www.ainvest.com/news/applied-materials-navigating-term-turbulence-unlock-long-term-semiconductor-sector-2508/
[3] https://www.ainvest.com/news/riley-securities-raises-pt-15-maintains-neutral-rating-applied-2508/