Deutsche Bank Downgrades Applied Materials to Hold, Lowers PT to $170 from $200

Deutsche Bank Downgrades Applied Materials to Hold, Lowers PT to $170 from $200

July 02, 2025

In a significant move, Deutsche Bank has downgraded its rating on Applied Materials (AMAT) to Hold and lowered its price target to $170 from $200. The decision comes on the heels of the semiconductor equipment maker's recent fiscal fourth-quarter forecast, which revealed a sluggish demand from China and growing tariff-related risks.

The Santa Clara, California-based company projected adjusted earnings per share of $2.11, plus or minus $0.20, for the three months ending in October, down from $2.32 in the same period last year. Revenue is expected to come in at $6.7 billion, give or take $500 million, compared with $7.05 billion a year earlier [1].

The outlook was not aligned with Wall Street’s expectations, with analysts on average estimating $7.33 billion in sales. The company's warning follows similar caution from ASML Holding, with both major equipment makers flagging China as a growing operational risk [2].

Despite the weaker outlook, Chief Financial Officer Brice Hill reiterated the company’s confidence in medium- to long-term growth, particularly from artificial intelligence, advanced process technologies, and DRAM demand. Hill noted that while demand for AI is strong, it is uneven, and the company is investing heavily in its US operations, including a partnership with Apple and a new facility in Arizona [1].

Analysts see mixed short-term prospects. JP Morgan analyst Harlan Sur, who rates the stock “overweight” with a $220 price target, expects the company to underperform this year due to heavy China exposure and weakness in its ICAPS segment. Citigroup, with a “buy” rating and $205 price target, noted potential product mix challenges compared to peers like KLA and Lam Research. Morningstar maintained its $196 fair value estimate, citing the company’s strong position to capitalize on AI-driven demand over the medium term despite near-term challenges [1].

UBS also lowered its price target to $180, citing significant and unique share pressure in China, particularly for large new projects. The firm noted that domestic Chinese semiconductor equipment suppliers are gaining market share in non-critical applications like chemical mechanical planarization (CMP), physical vapor deposition (PVD), and non-critical etch steps. UBS expects the company to benefit from a recovery in mobile-related display investments, particularly from display makers like Samsung [2].

Applied Materials' shares have been volatile, with the stock rising 15.7% so far this year compared to a 12.5% increase in the Nasdaq index. However, the company's recent results have weighed on smaller rivals KLA Corp and Lam Research, with both stocks falling more than 5% each after Applied's results [3].

Deutsche Bank's downgrade reflects ongoing concerns in the semiconductor sector, particularly related to geopolitical and market dynamics in China. The firm noted that while Applied Materials maintains strong financial metrics, the company faces significant challenges in China, which are clouding visibility into core earnings potential.

References:

[1] https://invezz.com/news/2025/08/15/applied-materials-falls-14-on-weak-forecast-china-woes-long-term-upside-seen/
[2] https://za.investing.com/news/analyst-ratings/applied-materials-stock-price-target-lowered-to-180-by-ubs-on-china-share-pressure-93CH-3842561
[3] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3U70KK:0-applied-materials-shares-sink-on-weak-china-demand-tariff-uncertainty/