- Applied Materials shares rose about 3% during Wednesday's session after Needham raised its price target to $110.00.
- The move comes after the company's strong fiscal fourth quarter financial results in mid-November, where it projected ongoing growth into 2021.
- The relative strength index (RSI) remains relatively neutral, suggesting room for additional upside, although the moving average convergence divergence (MACD) remains bearish, painting an uncertain intermediate-term picture.
Needham analyst Quinn Bolton notes that the last cycle wasn't easy for the company's weak NAND sector, but the WFE's shift to DRAM could be a positive catalyst over the coming quarters. In addition, Bolton believes that the stock's value has become attractive as its forward P/E multiple has fallen three to four turns below its closest peer.
During its fiscal fourth quarter, Applied Materials reported revenue that rose 25.1% to $4.69 billion, beating consensus estimates by $90 million, and non-GAAP earnings of $1.25 per share, beating consensus estimates by eight cents per share. With strong demand moving into fiscal 2021, the company also issued revenue and EPS guidance that came in above expectations.
From a technical standpoint, the stock rebounded from its reaction lows made earlier this week. The RSI remains only slightly overbought with a reading of 61.78, but the MACD remains in a bearish downtrend. These indicators suggest that the stock may have more room to run, but its intermediate-term outlook remains somewhat uncertain on a technical level.
A double top is an extremely bearish technical reversal pattern that forms after an asset reaches a high price two consecutive times with a moderate decline between the two highs. It is confirmed once the asset's price falls below a support level equal to the low between the two prior highs.
Traders should watch for a move to retest prior highs of $90.61 over the coming sessions. If the stock breaks out from these levels, traders could see a move toward trendline resistance at around $95.00. If the stock fails to break out, traders could see a move toward prior reaction lows of $83.53 or the 50-day moving average at $76.63, although that seems less likely to occur given the bullish fundamentals.
The Bottom Line
Applied Materials shares rose about 3% during Wednesday's session after Needham raised its price target to $110.00 per share. With a neutral RSI reading, the stock could have more room to run over the coming sessions, although the bearish MACD paints an uncertain picture over the intermediate term.
The author holds no position in the stock(s) mentioned except through passively managed index funds.