Deutsche Bank Raises Price Targets on 3 Top Chip Equipment Stocks

With a focus on some of the industry leaders, the Deutsche Bank team points out that with new technology on the horizon, there could be a very solid increase in spending from the top chip companies. An increase in capital expenditure spending could mean some solid gains for aggressive growth investors who like technology.

Applied Materials Inc. (NASDAQ: AMAT) has long been the powerhouse name in chip capital equipment, and it is upgraded from a Hold rating to Buy at Deutsche Bank. The company is ramping up its efforts to be a bigger player in the NAND sector. For Applied Materials, where its share has been low in this arena, the new architecture throws open a new opportunity. We had noted a rising short interest position in the stock earlier this year, but with the current short position of just 6%, many of the bears seemed to have left.

Applied Materials investors are paid a 1.65% dividend. The Deutsche Bank price target for the stock is lifted from $22 to $30. The Thomson/First Call consensus price target is $25.63. Shares ended Monday at $24.24.

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Lam Research Corp. (NASDAQ: LRCX) is another top chip equipment stock to buy now. The company designs, manufactures, markets, refurbishes and services semiconductor processing equipment used in the fabrication of integrated circuits. Many Wall Street analysts have highlighted the company and its peers as having a significant equipment opportunity from the NAND evolution as well. The Deutsche Bank team also sees the company as well positioned to gain share in the wafer fab equipment market, driven by a strong focus on technology inflection spending over the next few years.

Lam Research investors are paid a 0.9% dividend. The Deutsche Bank price target goes up big from $81 to $95. The consensus target is lower at $83.43. Lam Research closed trading Monday at $82.37 a share.

Teradyne Inc. (NYSE: TER) is another top stock to buy at Deutsche Bank. The company is a leading supplier of equipment used to test semiconductors, wireless products, data storage and complex electronic systems that serve consumer, communications, industrial and government customers. Teradyne reported solid third-quarter 2014 earnings of $0.44 per share, comfortably beating the consensus estimate, and the fourth quarter may surprise to the upside. The Deutsche Bank team feels that the 25% discount the company trades at to its peers will start to erode over time.

Teradyne investors receive a 1.2% dividend. The Deutsche Bank price objective is $24, and the consensus target is $21.81. Teradyne closed Monday at $19.77.

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With corporate capital expenditure budgets expected to remain solid next year, these top stocks to buy could have meaningful upside. Investors with aggressive growth portfolios may want to watch for pullbacks in these stocks to scale in some capital.