11:49 AM EDT, 05/17/2024 (MT Newswires) -- Applied Materials ( AMAT ) faces the prospect of softer China demand and "strong offsetting tailwinds" in logic chips and advanced semiconductor packaging after fiscal Q2 results topped consensus, Morgan Stanley said Friday in a note.

"At the risk of sounding like a broken record, we do believe the company that China will trend back toward the more traditional 30% of revenue from the current 43%," the note said.

"We remain on the cautious side of that; a region that is less than 5% of the global manufacturing footprint in foundry and memory driving over 40% of equipment sales and driving growth in trailing edge ICAP revenues higher during the worst analog inventory correction in 30 years, has unsustainable elements that make us cautious," Morgan Stanley said.

Still, "several trends are likely to prove strong offsetting tailwinds as the company has positioned themselves well in advanced logic and advanced packaging," the note said.

On Thursday, the company reported fiscal Q2 non-GAAP earnings of $2.09 per diluted share on revenue of, $6.65 billion. Analysts polled by Capital IQ expected EPS of $1.99 on revenue of $6.54 billion.

Morgan Stanley increased its 2024 estimates on EPS to $8.32 from $7.84 and to $27.1 billion from $26.2 billion for revenue.

The investment firm raised the company's price target to $223 from $215, keeping the equalweight rating.

Applied Materials ( AMAT ) shares rose 0.1% in recent trading Friday.

Price: 214.20, Change: +0.17, Percent Change: +0.08