4 big analyst picks: Applied Materials a ‘Top Pick’ at Wolfe

By Davit Kirakosyan

Here is your Pro Recap of the biggest analyst picks you may have missed since yesterday: initiation with Outperform at Applied Materials, and upgrades at Semtech, First Bancorp , and Virtu Financial.

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Applied Materials started with Outperform at Wolfe

Wolfe Research initiated coverage on Applied Materials (NASDAQ:AMAT) with an Outperform rating and a price target of $185.00, assigning a Top Pick designation.

We believe AMAT has the most balanced end market exposure among our SCE coverage and is well positioned for a cyclical rebound as both logic and memory spending normalize.

Additionally, the company has significant exposure to legacy node equipment (ICAPS) that is expected to drive structural growth. In the long term, Applied Materials has several secular drivers that are expected to enable it to grow beyond WFE, driven by non-litho innovations such as backside power, GAA, patterning, and packaging/wiring.

Semtech earns two upgrades following the Q2 beat

Semtech (NASDAQ:SMTC) earned two upgrades after reporting Q2 results that came in better than consensus estimates, while Q3 guidance misses expectations, as reported in real-time on InvestingPro. As a result, shares gained more than 10% yesterday.

Summit Insights upgraded the company to Buy from Hold, noting that the inventory correction in Semtech's signal integrity and protection sector is now in the past. The firm expects sales of 5G wireless IoT products to bottom this quarter.

We expect IoT products inventory correction to be completed in 2H23 and expect a recovery by 1HCY24. While demand recovery may not be straight up and to the right, we think demand recovery can now drive financial outperformance in the next few quarters.

Meanwhile, Susquehanna upgraded the company to Positive from Neutral with a price target of $30.00.

Two more upgrades

First Bancorp (NASDAQ:FBNC) shares gained more than 5% yesterday after DA Davidson upgraded the company to Buy from Neutral with a price target of $34.00 (from $36.50).

According to the firm, First Bancorp exhibits several defensive characteristics, including funding costs and composition, liquidity, capital, and perfect credit quality.

The NIM outlook is for a diminished pace of pressure in 3Q23, stabilization in 4Q23, and expansion thereafter, as FBNC’s rise in loan yield should be steadier and more back-end loaded in the rate cycle.

Citi upgraded Virtu Financial (NASDAQ:VIRT) to Buy from Neutral with a price target of $20.00 after the company faced a sharp stock decline of more than 8% on Wednesday following a recent SEC filing lawsuit against the company. Citi believes that the market's reaction to the news is overdone. Yesterday, the stock closed with more than a 6% gain.

While the SEC case will remain an overhang for some time, given prior cases—the most egregious of which was ITG’s which settled for $20M—we would expect any settlement/fine to be financially manageable. Based on our discussions with the company, there has been no client reaction from the SEC case, and we believe the business will not be impacted by the headlines.

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