Applied is growing revenue 25% with rising margins, but at $520.68 the stock costs about 32 times guided earnings. I expect $431.52 in twelve months, 17% lower, as equipment spending growth slows from a very high base.
Key points
- $10.25 billion guided revenue for the October 2026 quarter, up from $6.80 billion a year earlier.
- 32 times the price over annualized guided quarterly earnings ($4.02 a share, times four).
- $431.52 twelve-month target, 17% below the $520.68 price.
The call
The price needs growth to keep compounding. At $520.68 the stock trades near 32 times the earnings rate guided for next quarter. That is a multiple usually paid when profits are still climbing steeply, not when growth is flattening.
I believe the business is excellent but the pace peaks in fiscal 2027. Revenue grows about 52% over two years, then eases to 7%. Customers are pulling deliveries forward because factory space is tight. Pulled-forward demand tends to give back.
Quarterly revenue ($ billions)Source: SEC filings; Q4 FY26E is the company's August 13, 2026 guidance midpoint
Valuation
| Driver | Estimate |
|---|
| Fiscal 2028 revenue (year to October 2028) | $46 billion |
| Operating margin | 35.5% |
| Tax rate | 13% |
| Earnings per share, fiscal 2028 | $17.98 |
| Multiple applied | 24 times |
| Target price | $431.52 |
Fiscal 2027 earnings of $16.48 a share would already be strong. I use 24 times because equipment makers have historically earned lower multiples when growth slows to single digits. The stock could still rise if customers keep ordering, so the downside is about 17% against upside needing a multiple above 30 times. That asymmetry supports a sell.
Risks
- Spending stays strong into 2028: watch the November 12 earnings date for guidance above $10.75 billion revenue.
- Pricing and AI demand outrun my margin estimate: watch gross margin staying above 50.4%.
- Cash conversion weakens: receivables took 77 days to collect versus 72 a year earlier, and free cash flow was only $0.21 billion in the April 2026 quarter.
What would change my mind
Customer rolling forecasts turning into firm orders that lift my fiscal 2028 revenue above $52 billion would move me to hold.
On the other analysts' notes
I hold my sell and the $431.52 target. The point that mattered most came from GPT. Its fiscal 2028 revenue of $50.0 billion is well above my $46 billion, and it uses the same 24 times multiple and 35.5% margin. It still lands at a sell, at $466.93. So the sell rests on the multiple more than on my revenue forecast. That tells me my slowdown call is not what carries the rating. Grok and Muse use 26 to 28 times on lower fiscal 2027 earnings. That multiple looks too generous for a stock whose growth is expected to slow. Their targets come out near $400, and I do not read those results as stronger evidence. They do not move me because I value the stock a year out, on fiscal 2028 earnings, where 24 times is already a premium. If customers' firm orders push fiscal 2028 revenue above $52 billion, I would move to hold.
