Merrill Upgrades Applied Materials to 'Buy'

Analyst Brett Hodess cites the chip maker's high leverage to Taiwan

Merrill Lynch upgraded Applied Materials (AMAT ) to buy from neutral.

Analyst Brett Hodess says supply vs. demand analysis shows an increased likelihood for industry growth in excess of 25% in 2004 with the potential for more growth in 2005. He says the driving force behind his upgrade is the chip maker's high leverage to Taiwan.

Additionally, Hodess believes Applied Materials' broad product portfolio provides extra leverage to technology and capacity buys early in the cycle. He raised the 55 cents fiscal 2004 (Oct.) earnings per share estimate to 60 cents, and initiated a $1.05 fiscal 2005 earnings per share estimate. He also set a $27.50 price target.

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