Applied Materials initiated with "hold"

04/02/04 - WR Hambrecht & Co

NEW YORK, April 2 (New Ratings) — Analyst Gerald S Fleming of WR Hambrecht initiates coverage of Applied Materials, Inc (AMAT) with a “hold” rating. The target price is set to $22.

Shares of Applied Materials, a leading semiconductor capital equipments company, are currently trading at $21.72.

According to WR Hambrecht’s research note published this morning, Applied Materials is well positioned to benefit from the continued positive momentum in the demand trends in the semiconductor equipments industry through 2005. The analyst mentions that the company has reported annual revenue growth of about 25% for the past several years. However, WR Hambrecht expects Applied Materials’ annual revenue growth to remain at 10%-12% in the forthcoming years, in-line with the average growth rate of the industry.

Applied Materials is poised for increased competitive pressures in its process equipments end markets in the near term, as compared to the broader semiconductor equipments industry trends, the analyst says. The company is likely to introduce a new wafer cleaning product this year in order to expand its presence in this market segment, WR Hambrecht says. The current valuation of Applied Materials’ stock has limited near-term upside potential, the analyst believes.

The EPS and P/E estimates for 2005 are $1.23 and 18x, respectively.

WR Hambrecht initiates coverage of Applied Materials, Inc with a “hold” rating.