Applied Materials shares plunged about 14% after the semiconductor equipment maker issued weak guidance as it faces demand pressures in China.
The company forecast adjusted earnings per share of $2.11, falling short of the $2.39 per share expected by LSEG. The company projected $6.7 billion in revenue, versus the $7.34 billion estimate.
During an earnings call with analysts, CEO Gary Dickerson said that the current macroeconomic backdrop and trade issues have fueled “increasing uncertainty and lower visibility,” primarily within its China business.
He also said the guidance does not account for pending export license applications and assumes a significant backlog.
Applied Materials also cited weakness from leading-edge customers and said China clients are easing spending after rapidly ramping up equipment manufacturing in the region.
Bank of America‘s Vivek Arya downgraded shares to a neutral rating and lowered his price target, citing ongoing China and leading-edge headwinds.
“The uncertainty could persist, making it tougher for the stock to outperform despite reasonable valuation,” he wrote. “We suspect the slowdown is more company specific.”
Despite the weak guidance, Applied Materials topped third-quarter earnings and revenue estimates, posting adjusted earnings of $2.48 per share on $7.3 billion in revenue. Net income reached $1.78 billion, or $2.22 a share, versus $1.71 billion, or $2.05 a share, a year ago.