Shares of Applied Materials (AMAT) are on the rise after Susquehanna analyst Mehdi Hosseini upgraded the stock to Positive, saying his recent checks suggest that the company has scored "major" memory design wins. The analyst believes this should help it regain lost share and put it back on track for an "annualized" earnings per share run rate of $5 in the second half of 2020.

'MAJOR' MEMORY DESIGNS WIN: In a research note to investors, Susquehanna's Hosseini upgraded Applied Materials to Positive from Neutral and raised his price target on the shares to $60 from $34. The analyst pointed out that his recent checks suggest that the company has secured "major" memory design wins that should help it regain lost share and put it back on track for an "annualized" earnings per share run rate of $5 in the second half of 2020. Hosseini also highlighted that Semi Cap fundamentals are "not far from a bottoming."

Although the continued U.S./China tariff dispute is viewed as a headline overhang, the analyst reminded investors that the majority of semiconductor chips, particularly memory, are manufactured outside of China. The downside risk stems from a more prolonged depressed memory margin profile that could cause memory customers to have a slower recovery in capex spending, he contended.

CUSTOMER GAINS: In a separate research note, Susquehanna’s Hosseini also upgraded Advanced Energy (AEIS) to Positive from Neutral, stating that he believes the company is poised to benefit from market share gains made by its largest customer, Applied Materials. With Applied Materials scoring "major" wins against key Deposition and Etch competitors like TE Connectivity (TEL), the analyst expects Advanced Energy to be one of the key beneficiaries, especially since TE Connectivity procures from Japan while Applied Materials relies on key sub-component vendors like Advanced Energy and MKS Instruments (MKSI).

Hosseini expects Advanced Energy's semi business unit to continue to see sequential decline in the June quarter as key customers like Applied Materials and Lam Research (LRCX) digest inventories. This is expected to be followed by flattish trends into the September quarter, and finally some sequential growth into the December quarter as largest customer, Applied Materials, starts procuring sub-components for new product ramps in early 2020, he contended. The analyst also raised his price target on Advanced Energy's shares to $82 from $45.

PRICE ACTION: In morning trading, shares of Applied Materials have gained about 2% to $40.61, while Advanced Energy's stock jumped almost 8% to $52.26.