By Wallace Witkowski, MarketWatch
Applied Materials/Digiman Studio
Applied Materials Inc. led semiconductor-related stocks to losses Friday and to a weekly decline after the chip-maker materials supplier’s outlook indicated a possible slowing in the recently hot sector.
Applied Materials /zigman2/quotes/209393259/composite AMAT -4.70% shares fell 8.3% to close at $49.51, after hitting an intraday low of $48.53, as analysts were split on target price moves after the company’s sales outlook was lighter than Wall Street expected. In comparison, the PHLX Semiconductor Index /zigman2/quotes/210598361/realtime SOX -4.65% finished down 1.4% Friday with the S&P 500 Index shedding 0.3%.
For the week, shares of Applied Materials are down 9.7%, the SOX index swung to a weekly loss of 0.4%, and the S&P 500 /zigman2/quotes/210599714/realtime SPX -4.42% finished down 0.5%. For the year, Applied Materials shares swung to a 3.2% loss, while the SOX is up 7.4% and the S&P 500 is up 1.5%.
Late Thursday, Applied Materials estimated adjusted earnings of $1.13 a share to $1.21 a share for its fiscal third quarter on revenue of $4.33 billion to $4.53 billion, while analysts surveyed by FactSet had expected earnings of $1.16 a share on revenue of $4.53 billion.
Of the 27 analysts that cover Applied Materials, 21 have overweight or buy ratings and six have hold ratings, according to FactSet data. Following earnings, 17 analysts commented on the stock with six lowering their price targets and three raising them.
Instinet analyst Romit Shah, who has a buy rating on the company, lowered his price target to $65 from $70 based on Applied Materials’s expected decline in OLED display revenue in fiscal 2019, while Stifel analyst Patrick Ho, who also has a buy rating, raised his price target to $75 from $70 even as the stock tanked. Ho said “the company’s makeup and profile is what differentiates Applied from all of its peers” and that any potential pullback represented a buying opportunity.
Applied Materials’s light guidance comes on the heels of strong results from other chip makers like Nvidia Corp. /zigman2/quotes/200467500/composite NVDA -5.57% and Intel Corp. /zigman2/quotes/203649727/composite INTC -6.40% this earnings season. Other notable decliners on Friday included Entegris Inc. /zigman2/quotes/200628784/composite ENTG -3.12% , KLA-Tencor Corp. /zigman2/quotes/209248041/composite KLAC +0.49% , Lam Research Corp. /zigman2/quotes/208077897/composite LRCX -3.67% , and Micron Technology Inc. /zigman2/quotes/205710729/composite MU -3.42% .
“The overall PC market sales are turning weaker than expected in the traditional low season of the second quarter of 2018 despite stable gaming and business PC demand, due mainly to sluggish buying sentiment for consumer PCs and the abrupt waning in demand for crypto mining devices starting in April,” said Oppenheimer analyst Rick Schafer in a note.
Not all chip makers were down Friday, however, a few outliers traded higher.
Advanced Micro Devices Inc. /zigman2/quotes/208144392/composite AMD -7.33% shares finished up 1.4% after Cowen & Co. initiated coverage of the stock at a buy and a $18 price target. Of the 30 analysts who cover AMD, 13 have buy or overweight ratings, 12 have hold ratings, and five have sell ratings, with an average target price of $14.02.
Qualcomm Inc. /zigman2/quotes/206679220/composite QCOM -4.67% shares closed up 1% after one analyst said he’s optimistic that the chip maker’s bid to acquire NXP Semiconductors NV /zigman2/quotes/202999625/composite NXPI -4.04% will go through. So far, the Qualcomm/NXP tie-up has been delayed by Chinese regulators in what some believe may be a trade war ploy.
RBC Capital Markets analyst Amit Daryanani said in a research note that China’s approval of an $18 billion sale of Toshiba Corp.’s /zigman2/quotes/205628942/delayed JP:6502 -2.25% memory chip arm to a group led by Bain Capital on Thursday and President Donald Trump’s claims that he is working with China to get ZTE “back to business fast” are good signs that the Qualcomm deal will gain approval soon.