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Why Analysts and Investors Are Optimistic about AMAT Stock

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2016 was a good year for the semiconductor equipment industry

In this series, we’ve seen that Applied Materials (AMAT) reported strong growth in 2016 as the technology industry started process migration. Rivals Lam Research (LRCX) and KLA-Tencor (KLAC) also reported strong growth in 2016. Overall, 2016 was a good year for the semiconductor equipment industry.

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Stock price movement

In 2016, AMAT’s stock rose 92.2%, outperforming the stocks of LRCX and KLAC, which rose 50% and 20.6%, respectively. This growth was mainly driven by a strong order book and renewed demand in the display segment. LRCX and KLAC stocks rose after the two canceled their merger on October 5, 2016, due to opposition from the United States antitrust authorities.

Wall Street ratings

Wall Street analysts have a “strong buy” recommendation for both AMAT and LRCX even though they are trading near their 52-week highs. These recommendations indicate that analysts and investors are optimistic about these stocks’ future growth potential.

AMAT has an average price target of $37, and it’s currently trading at a discount of 4% from the target. The price target is higher than the stock’s 52-week high of $35.85. The stock may reach the price target if it reports better-than-expected fiscal 1Q17 earnings and guidance.

LRCX has an average price target of $130 and it is currently trading at a discount of 10.6% from the target. The price target is higher than the stock’s 52-week high of $119.14.

Analysts have a “hold” rating for KLAC and an average price target of $85. The stock is currently trading at a premium of 2.6% from the target, which indicates that analysts are not optimistic about the stock.

Overall, the semiconductor equipment market is currently at its peak, but the growth is likely to be slow over the coming years. However, the growth would continue to be in double digits. The strong equipment environment indicates that the overall semiconductor industry is likely to grow in the coming years, although not at historic levels.

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