The stock needs fiscal-2027 earnings near $20 a share. I model $15.30. A 26 times multiple on that work produces $398, 24 percent below the last close.
Key points
- $34.3 billion fiscal-2026 revenue at guidance, up 21% from $28.4 billion in fiscal 2025.
- 39 times that year’s $13.24 of earnings; the last close needs about $20 of fiscal-2027 earnings at 26 times.
- $15.30 is my fiscal-2027 earnings per share: $41 billion of sales, 33.5% operating margin, 13% tax, 790 million shares.
The call
The last close of $520.68 requires roughly $45 billion of fiscal-2027 sales, or earnings near $20 a share if the multiple stays in the mid-20s. That is a 31% jump from a year that already includes a $10.25 billion fourth quarter.
I model $41 billion of sales next year, another growth year but not a second 21% leap, and $15.30 of earnings. Equipment cycles do not compound at that rate once cleanrooms fill. The market is too optimistic.
Revenue by quarter ($ billions)SEC filings through Q3 FY26; Q4-Q4E and FY27E are mine. Price needs ~$45B FY27.
Valuation
| Line | Figure |
|---|
| Fiscal 2027 sales (mine) | $41.0 billion |
| Operating margin | 33.5% |
| Net income after 13% tax | $12.1 billion |
| Diluted shares | 790 million |
| Earnings per share | $15.30 |
| Multiple, 12 months out | 26 times |
| Price target | $398 |
Twenty-six times is a premium cycle multiple, not a trough. If I am right on earnings and the multiple holds, the stock still has to fall. If I am wrong and sales run to $45 billion, the stock can sit still. Asymmetry favors the seller.
Gross and operating margin (%)- Gross margin
- Operating margin
Company 10-Q series through Q3 FY26. Q4E and FY27E are mine.
Risks
- Leading-edge logic and DRAM customers pull in more tools than the eight-quarter forecasts already imply.
- Gross margin keeps climbing past 51% on mix and pricing, lifting earnings without extra volume.
- A lower 10-year yield re-rates the whole equipment group above 30 times.
What would change my mind
Fiscal-2027 revenue guidance above $44 billion with operating margin still at 33% or better.