Why Applied Materials Stock Was Trailing the Broader Market on Tuesday

Source The Motley Fool

Although Applied Materials (NASDAQ: AMAT) stock wasn't doing badly in late-session trading on Tuesday, there were plenty of other titles that were eclipsing it. Its rise was tempered by an analyst's price target cut, which dampened sentiment on the chipmaking equipment specialist's prospects.

With that moderate headwind, Applied Materials was rising by 1.7% on the day; meanwhile, the S&P 500 index was clocking a 2.3% increase.

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A $30-per-share chop

That morning, Tom O'Malley of storied bank Barclays reduced his Applied Materials price target to $160 per share, a notable shift from his previous estimation of $190.

In changing his price target, O'Malley maintained his equal-weight (hold, in other words) recommendation on the stock.

According to reports, the analyst's modification followed the updating of his models for Applied Materials business. The new projections consider the potential effect of the current set of tariffs imposed by the U.S. on its trading partners.

This is almost certain to negatively impact its business, even though exemptions have been made to certain popular tech products.

The trouble with tariffs

For its part, Applied Materials management is maintaining a brave face in an uncomfortable and still-unpredictable environment. Last month the company went so far as to declare a dividend raise (of 15% over its predecessor) and announce the launch of a new, $10 billion share buyback program.

Both moves signal to the market that the company is OK despite the turbulence, although investors seem resigned to the potential for notable damage to its business from the current tariff spat. I'd give it the benefit of the doubt, as it's an important producer of components for the indispensable chip industry.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Applied Materials. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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