UPDATE: Stifel Reiterates on Applied Materials on Strong Accretion Potential from TEL Deal

In a report published Monday, Stifel analyst Patrick Ho reiterated a Buy rating on Applied Materials (NASDAQ: AMAT), and raised the price target from $18.00 to $23.00.

In the report, Stifel noted, “We are raising our target price on shares of Applied Materials to $23 from $18 to reflect 12x our pro-forma EPS of $1.70 (including options) plus net cash of approximately $2 per share of a combined Applied Materials-Tokyo Electron one year after the close of the deal. In this assumption, we will use CY15 as the basis since our current projection is for the deal to close sometime in 2H14. Based on our proprietary analysis, we believe the company can achieve approximately $1.70 in EPS driven by some of the cost savings and synergies management has previously discussed ($250 million in the first year after the deal closes and $500 million within three years). We are also more confident that the company can achieve its stated long term targets of 1) $18.2 billion in revenue, 2) operating margins of 25%, and 3) pro-forma EPS of $2.40 (based on 2017 or 3 years after the deal close and $37 billion WFE environment).”

Applied Materials closed on Friday at $17.75.