Jeffries Raises AMAT Price Target, Cites AI Driving DRAM and Advanced Packaging Equipment Demand

BlockBeats News, June 26th. In a report on June 25th, Jefferies raised Applied Materials' price target from $510 to $770 and maintained a "Buy" rating. The reason is that AI is driving the increasing complexity of DRAM, HBM, and advanced packaging manufacturing, thereby expanding AMAT's equipment market.

The closing price of AMAT the previous trading day was $668, with the new target price representing approximately 15% upside potential. Jefferies also provided a $900 bull case scenario and a $500 bear case scenario.

The report stated that DRAM is increasingly adopting advanced logic chip processes, including FinFET, CMOS Bonded Array, more EUV, and complex interconnects. This will enhance deposition, etch, interconnect, and process control steps, enabling AMAT's DRAM addressable market to increase from around $6 billion for a 6F² architecture at every 100k wafers per month capacity to $6.5 billion for a 4F² and reaching approximately $7.5 billion in the 3D DRAM phase.

HBM is another key driver. Jefferies stated that for HBM to achieve equivalent bit shipments, it requires 3 to 4 times the wafer input, so even with moderate DRAM bit growth, actual equipment demand will be magnified. AMAT holds approximately 50% of the addressable market share in HBM packaging-related equipment.

Advanced packaging is also gaining momentum. Jefferies expects AMAT's advanced packaging business to grow by over 50% this year, exceeding $2 billion in revenue, with the business having tripled from 2020 to 2024. Future growth will come from hybrid bonding, 3D/3.5D packaging, panel interposer, and CoPoS. The report specifically mentioned the Kinex die-to-wafer hybrid bonding system, believing that AMAT will benefit from the increase in AI accelerator package size and packaging process upgrades.

Financially, Jefferies expects AMAT to have an EPS of $14.01 in fiscal year 2026 and $18.06 in 2027, with revenues of approximately $36.7 billion and $44.2 billion, respectively. The $770 target price is based on a 2028 calendar year EPS of $21.25 and a P/E ratio of about 36 times.

Risks include slowing capital expenditure by cloud vendors, stagnation in the wafer fab equipment market, AMAT losing share in deposition/etch/process control segments, and poor execution of manufacturing process transitions.