Applied Materials, ASML rise as New Street upgrades on expectations semi pain ends soon
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Applied Materials (NASDAQ:AMAT) and ASML Holding (NASDAQ:ASML) rose on Friday as investment firm New Street Research upgraded both semiconductor capital equipment makers, noting that the pain in the industry should end soon.
Analyst Pierre Ferragu raised his rating on both Applied Materials (AMAT) and ASML Holding (ASML) to outperform, stating that wafer fab equipment spending should "trough" in the low $60B range, following comments made by Lam Research (LRCX) earlier this week that it would be below $70B. 
"This means we expect only one more leg of revisions, likely triggered by further capex cuts in Logic, with the associated news flow likely to play out between now and mid-February," Ferragu wrote in a note to clients. "Based on the last cycle (2018-2019), this means now is a good time to start building positions in the sector."
Applied Materials (AMAT) gained 3.5% to $81.47 in early trading while ASML Holding (ASML) tacked on 2.8% to $449.53.
Competitors KLA Corp. (KLAC) and Lam Research (LRCX) also rose in early Friday trading. 
The analyst added that earnings multiples and stocks tend to bottom out a few months before the last leg of revenue revisions. At these levels, there is less than 20% additional revisions for most of the semiconductor capital equipment sector, with Ferragu adding that it would not be surprising to see "multiples improving from this point in time."
Ferragu also noted that wafer fab equipment spending in the next cycle could reach a peak of $150B and many equipment names have the "potential to triple."
Earlier this week, ASML Holding (ASML) reported better-than-expected third-quarter results and issued strong guidance.
Analysts are largely positive on Applied Materials (AMAT). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates AMAT a HOLD.