Applied Materials, Inc. (NASDAQ:AMAT) is falling even deeper off Monday's record high of $63.07, down 4.2% to trade at $57.16 after UBS cut the semiconductor stock to "sell" from "neutral," and slashed its target by one dollar to $48. The analyst foresees AMAT's wafer fab equipment run rate contracting in the first half of 2020, putting the stock at risk, and added that while its Display sales could defend against headwinds, weakening demand for LCD in China makes this possibility less likely.
The dip has AMAT eyeing its first close south of its 10-day moving average since late-October, and down roughly 7% for the week. The stock is testing its footing back at its pre-bull gap levels near the $56-$57 region, too -- an area it sliced through after a fiscal fourth-quarter earnings beat last week. On the other hand, the shares boast a roughly 74% year-to-date gain.
UBS' warning comes just days after analysts swarmed the stock will bull notes. In fact, coming into today, 12 called AMAT a "buy" or better, compared to six "hold" ratings, and not a single sell to be seen. Plus, the consensus 12-month price target of $67.04 is a 16% premium to last night's close, leaving the equity wide open for bear notes and/or price-target cuts.
This week's slide may have been inevitable. The stock last Friday was firmly in "overbought" territory with a 14-day Relative Strength Index (RSI) of 78. This suggests a short-term sell-off may have already been in the cards for AMAT.