Category: AMAT

AMAT – If Data Is the New Oil, This Stock Will Soar

For the past 10 years or so, a popular phrase in the technology industry has been, “data is the new oil.” The thinking behind that saying is that while oil powered much of the 20th-century economy, the collection, processing, and use of data in decision-making would power the economy of the 21st century.

Given the current massive shortage of semiconductors coming out of the pandemic pushing up prices for various goods, especially cars, it looks as though that term is turning out to be true.

Assuming accelerating data growth continues this decade and beyond, Applied Materials (NASDAQ:AMAT), the largest, most diverse semiconductor equipment company in the world, stands to benefit handsomely. Yet although the company just reported another strong quarter last week, miraculously, the stock still trades at a cheaper valuation than the overall market.

A semiconductor wafer emerges from a pile of gray minerals.

Image source: Getty Images.

Another quarter of booming growth

In the company’s fiscal third quarter ending in June, Applied’s revenue surged 41%, while earnings per share grew a whopping 79% and free cash flow doubled. Applied has the largest and broadest portfolio for semiconductor equipment in the industry, spanning etch, deposition, metrology, and even advanced packaging, along with a slew of value-add services. 

Currently, just about all of Applied’s segments are firing on all cylinders, with each of its segments outperforming expectations, according to management. Though the semiconductor equipment industry is in a boom right now, Applied took market share last year on top of that, despite its already being the largest company in the space.

So why’s it so cheap? 

Despite these eye-opening results, Applied Materials’ stock still trades at a discount to the market, at 19.3 times this year’s earnings estimates (its fiscal year ends in September). That’s below the 31 P/E ratio of the S&P 500 and even lower than the 22 P/E forward ratio for the S&P based on next year’s earnings estimates.

With a high-margin business and balance sheet with $6.1 billion in cash against just $5.5 billion in debt, Applied Materials is also repurchasing shares at what seems like a great price. Last quarter, the company bought back $1.5 billion in stock. If one annualizes that to $6 billion, that’s good enough to retire 5.2% of the company’s shares at current prices, on top of a 0.75% dividend, good for a total shareholder return of nearly 6%.

The reason investors may not be giving Applied Materials its due is due to the highly cyclical past of the semiconductor industry, which has traditionally caused rather large swings in equipment sales from year to year. 

A brain on top of a semiconductor chip on printed circuit board.

Applications like 5G and artificial intelligence are driving a semiconductor super-cycle. Image source: Getty Images.

Why Applied’s future may not be as cyclical in its past

While it’s always dangerous to say “this time is different,” there are a number of reasons why semiconductor equipment sales should be more consistent into the 2020s, and why companies that produce them should also be more resilient.

First, given the increasing importance of semiconductors, as well as the difficulty and capital intensity of producing leading-edge chips, chip foundries have announced multi-year investment plans, to the tune of hundreds of billions of dollars. On the conference call with analysts, Applied’s management disclosed a backlog of orders reaching nearly $10 billion — an all-time record for the company.

At the same time, Applied Materials and its peers have also developed lots of value-add services to help customers get the most of out of their machines, while also developing recurring subscription services within that services segment, which currently makes up 21% of revenue. Chief Financial Officer Dan Durn talked at length about Applied’s growing recurring revenue segment on the conference call:

Connecting the installed base to our AIx servers enables us to perform data-enabled services for our customers. Today, we have just over 4,300 connected tools, which is up over 30% from our 2020 baseline. We’re also growing the number of secure remote connections, which allows us to connect our best experts to the installed base to perform remote analytics, diagnostics, and optimization from anywhere in the world. The number of remote-connected tools now exceeds 3,200, which is up over 36% from our 2020 baseline. Another key focus is transitioning our recurring revenue to subscriptions in the form of long-term service agreements. Today, we’re generating 60% of our recurring revenue from subscriptions, and our goal is to reach around 70% by 2024. We also have a subscription renewal rate of around 90%. Another sign of customer value is the tenure of the agreements. Across the entire base of subscription agreements, we’ve increased the tenure from 1.9 years at the end of 2020 to 2.2 years today. In fact, of our subscriptions booked in Q3, 77% were multi-year agreements. We track all of these KPIs very closely. Finally, another key metric we disclose is AGS segment operating margin, which provides a good indicator of the value our services bring to customers. In Q3, it crossed 30% for the first time in 15 years.

Another point of good news on the services front is that Applied’s machine sales are growing faster than overall company sales, with systems revenue up 53% last quarter. Applied earns services revenues based on the number of chambers in its installed base, so those surging equipment sales should lead to future recurring services revenues for the life of those machines it’s selling today.

Given the long-term spending plans by customers and rising recurring services revenues, Applied’s current financial strength could be more consistent in the future than the market is giving it credit for. If that’s true, shares sure look cheap after its 13% pullback from recent highs.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

AMAT – Applied Materials Shares: $165 Target From DA Davidson

  • The shares of Applied Materials, Inc. (NASDAQ: AMAT) have received a price target of $165 from DA Davidson. These are the details.

The shares of Applied Materials, Inc. (NASDAQ: AMAT) have received a price target of $165 from DA Davidson. And DA Davidson analyst Thomas Diffely is maintaining a “Buy” rating on the company shares.

Diffely adjusted the price target following the company’s third-quarter earnings and beat on revenues. And Diffely noted that Applied Materials had reported another record quarter with robust demand and solid execution. For the near-term, the supply chain risks for Applied Materials continue, but Diffely’s long-term view is unchanged with robust activity being driven by the major industry inflections permeating many of its served end markets.

Applied Materials had reported a record net income of $1.72 billion (or $1.87 a share) for the fiscal third quarter compared to $841 million (or $0.91 cents per share) in the year-ago period. The adjusted earnings – which excluded the effect of share-based compensation and other items – were $1.90 per share compared to $1.06 per share in the year-ago period. The company revenue increased to a record $6.2 billion from $4.4 billion in the year-ago quarter.

For the company’s fourth quarter, Applied Materials is forecasting adjusted earnings of $1.87 to $2.01 per share on sales of $6.08 billion to $6.58 billion.

“Applied Materials delivered record performance as long-term trends fueled by the digital transformation of the economy drive strong, secular demand for semiconductors,” said Gary Dickerson, President and CEO of Applied Materials. “Applied has the broadest and most enabling portfolio of technologies to accelerate our customers’ roadmaps, putting us in a great position to outperform our markets again in 2021 and the years ahead.”

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.

AMAT – Applied Materials (AMAT) Q3 Earnings and Revenues Beat Estimates

Applied Materials (AMAT Free Report) came out with quarterly earnings of $1.90 per share, beating the Zacks Consensus Estimate of $1.76 per share. This compares to earnings of $1.06 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 7.95%. A quarter ago, it was expected that this maker of chipmaking equipment would post earnings of $1.51 per share when it actually produced earnings of $1.63, delivering a surprise of 7.95%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Applied Materials, which belongs to the Zacks Semiconductor Equipment – Wafer Fabrication industry, posted revenues of $6.2 billion for the quarter ended July 2021, surpassing the Zacks Consensus Estimate by 4.66%. This compares to year-ago revenues of $4.4 billion. The company has topped consensus revenue estimates four times over the last four quarters.

The sustainability of the stock’s immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

Applied Materials shares have added about 47.6% since the beginning of the year versus the S&P 500’s gain of 17.2%.

What’s Next for Applied Materials?

While Applied Materials has outperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company’s earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Applied Materials was mixed. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $1.78 on $5.98 billion in revenues for the coming quarter and $6.55 on $22.65 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Semiconductor Equipment – Wafer Fabrication is currently in the bottom 15% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

AMAT – Applied Materials (AMAT) Gains But Lags Market: What You Should Know

In the latest trading session, Applied Materials (AMAT Free Report) closed at $133.05, marking a +1.39% move from the previous day. This change lagged the S&P 500’s 1.4% gain on the day.

Coming into today, shares of the maker of chipmaking equipment had gained 2% in the past month. In that same time, the Computer and Technology sector gained 7.26%, while the S&P 500 gained 1.07%.

Wall Street will be looking for positivity from AMAT as it approaches its next earnings report date. The company is expected to report EPS of $1.76, up 66.04% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $5.92 billion, up 34.7% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $6.53 per share and revenue of $22.65 billion. These totals would mark changes of +56.59% and +31.67%, respectively, from last year.

Investors should also note any recent changes to analyst estimates for AMAT. These revisions help to show the ever-changing nature of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company’s business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 8.74% higher. AMAT is holding a Zacks Rank of #2 (Buy) right now.

In terms of valuation, AMAT is currently trading at a Forward P/E ratio of 20.11. Its industry sports an average Forward P/E of 21.53, so we one might conclude that AMAT is trading at a discount comparatively.

Also, we should mention that AMAT has a PEG ratio of 1.12. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock’s expected earnings growth rate. AMAT’s industry had an average PEG ratio of 1.12 as of yesterday’s close.

The Semiconductor Equipment – Wafer Fabrication industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 24, putting it in the top 10% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.

AMAT – Applied Materials (AMAT) Q2 Earnings and Revenues Beat Estimates

Applied Materials (AMAT Free Report) came out with quarterly earnings of $1.63 per share, beating the Zacks Consensus Estimate of $1.51 per share. This compares to earnings of $0.89 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 7.95%. A quarter ago, it was expected that this maker of chipmaking equipment would post earnings of $1.27 per share when it actually produced earnings of $1.39, delivering a surprise of 9.45%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Applied Materials, which belongs to the Zacks Semiconductor Equipment – Wafer Fabrication industry, posted revenues of $5.58 billion for the quarter ended April 2021, surpassing the Zacks Consensus Estimate by 3.52%. This compares to year-ago revenues of $3.96 billion. The company has topped consensus revenue estimates four times over the last four quarters.

The sustainability of the stock’s immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

Applied Materials shares have added about 44.6% since the beginning of the year versus the S&P 500’s gain of 9.6%.

What’s Next for Applied Materials?

While Applied Materials has outperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company’s earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Applied Materials was mixed. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $1.57 on $5.55 billion in revenues for the coming quarter and $6 on $21.76 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Semiconductor Equipment – Wafer Fabrication is currently in the top 11% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

AMAT – AMAT Stock: $170 Target (Up From $142) By Craig-Hallum

  • The shares of Applied Materials, Inc. (NASDAQ: AMAT) have received a price target increase from $142 to $170 by Craig-Hallum. These are the details.

The shares of Applied Materials, Inc. (NASDAQ: AMAT) have received a price target increase from $142 to $170 by Craig-Hallum. Craig-Hallum analyst Christian Schwab is maintaining a Buy rating on the shares following the company’s analyst day. 

Schwab pointed out that Applied Materials is expecting the 2021 and 2022 wafer front end (WFE) to be somewhere between $150 billion and $160 billion. And the expectations for the 2021 WFE will likely be higher than $70 billion. 

Plus Schwab noted that the next wave of demand is just starting and it is expected to be less cyclical as it is going to be driven by secular trends that management believes are permanent like artificial intelligence and big data.

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.

AMAT – Here's why Applied Materials stock price fell this week

Shares of the American semiconductor equipment manufacturer Applied Materials (NASDAQ: AMAT) have rotated lower this week after the company published a new financial model for 2024 and other future plans which have raised concerns among investors. 

Fundamental analysis: New guidance announced

Under the new outlook, Applied Materials outlined their vision for the following several years and said that the chip industry is now of utmost strategic importance to the world economy. 


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The company’s executives said that there is a new surge in silicon consumption in the United States and other parts of the world, as a result of growing technologies such as artificial intelligence.  

“The AI inflection is driving a new era of innovation and secular market growth. It’s clear that the future isn’t going to be like the past. AI computing workloads require new semiconductor solutions at a time when traditional Moore’s Law scaling is slowing down,” said Applied Materials CEO Gary Dickerson. 

He added that in addition to its plans to address the surging demand, the company plans to shift its operations to focus on subscription-based revenue and optimize its products and services in a bid to generate more free cash flow and prompt growth.

Applied Materials estimates fiscal 2024 earnings of $8.50 a share on sales of $26.7 billion.

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Technical analysis: Rotation lower

Shares of the California-based company dropped 2.5% and closed below the $140 handle on Tuesday. The new guidance sent shares of other manufacturers tumbling as well, with ASML Holding slipping 2% to $628, and Lam Research (LRCX) dropping 1.3% to $652.48.

AMAT weekly chart (TradingView)

AMAT stock price has moved lower to trade about 6% off the record highs at $146.00. The price action has been constantly moving higher since October, during which period the stock gained over 150%. Hence, a correction at this stage is more than justified given the recent move higher.

Summary

Applied Materials said it plans to shift operations in the following years and issued a new financial model for 2024. Shares have rotated lower following the news to trade below the $140 mark again.

AMAT – Applied Materials Showcases Unique Capabilities to Accelerate Innovation and Drive Long-Term Profitable Growth

  • Outlines strategy to be “the PPACt enablement company”
  • Plans to grow revenue by over 55 percent and non-GAAP EPS by more than 100 percent by fiscal 2024
  • Commits to return 80 to 100 percent of free cash flow to shareholders

SANTA CLARA, Calif., April 06, 2021 (GLOBE NEWSWIRE) — At its 2021 Investor Meeting held today, Applied Materials unveiled plans to grow the company’s revenue, earnings and free cash flow by enabling customers to accelerate improvements in chip power, performance, area, cost and time to market (PPACt). Applied also announced plans to generate 70 percent of future services and parts revenue through subscription-like long-term agreements.

Applied outlined five major inflections that are fueling secular growth and the need for innovation as the company drives its longer-term strategy. At a macro level, the digital transformation of the global economy is accelerating. In computing, AI workloads are fueling the need for new architectures based on entirely new types of silicon. Within chipmaking, traditional Moore’s Law 2D scaling is slowing, creating the need for a “new playbook” for PPACt that enables continued chip- and system-level improvements. Another inflection is the need to grow the industry in a more sustainable and equitable manner. Finally, customers are seeking not just better products, but also better outcomes, resulting in a business model shift to solutions delivered via subscription models.

“The core of our strategy is to be the PPACt enablement company,” said Gary Dickerson, president and CEO of Applied Materials. “Our broad portfolio and ability to combine technologies in ways no other company can is accelerating value creation for our customers and puts Applied in a leadership position to advance the state of chipmaking for years to come.”

Applied has aligned its strategy to meet the increasingly complex needs of its customers, many of whom participated in the event to discuss trends in computing, semiconductor technology, services and ESG (environmental, social and governance).

Applied summarized the evolution of its Semiconductor Systems business. The portfolio is expanding from unit process equipment that performs a single step to include co-optimized systems with pre-proven combinations along with Integrated Materials Solutions where multiple process technologies are combined under vacuum to create novel materials and chip structures that are not otherwise possible.

“It has been a great journey to walk with Applied Materials over the past 30 some years,” said Dr. Mark Liu, chairman of TSMC. “Beyond 3nm, to sustain the rate of improvement, and I believe we will, we need to work together closer than ever before. We need to innovate in new transistor structures, in new materials, in new system architecture, and in new 3D integration. It is an exciting time. We look forward to working with Applied Materials to discover the future semiconductor innovations.”

The company also presented case studies of Applied AIX (Actionable Insight Accelerator) – a new platform that enables semiconductor engineers to use the power of big data and AI to accelerate the discovery, development and commercial deployment of new chip technologies.

“It’s hard to simply put a number on it, but we all know that improving the process margin is the key to enable technology node migration,” said Seok-Hee Lee, CEO and president of SK hynix. “In many cases, it not only requires the adoption of advanced new technologies in a number of areas including materials, process and equipment, but it also requires all those factors to be optimized for the integration of multiple process steps. Each change in process variables affects others at multiple levels, so accelerating the cycle of learning to come up with the optimal solution is crucial. If Applied Materials develops new process technologies which are already co-optimized with adjacent process steps, it will help reduce development complexity for chipmakers. I think our development activities can move at a fast pace if we work together to harness the power of sensors, big data and AI to map and predict the effect of many process variables.”

As electronic products become smarter the silicon content per device is increasing, including specialty semiconductors based on mature process nodes. Applied is addressing this growing demand with its ICAPS group (IoT, Communications, Automotive, Power and Sensors). The company is now generating more than $3 billion per year in the ICAPS business.

“GF is focused on the largest, most pervasive segments of the semiconductor industry and where technology has the broadest impact,” said Tom Caulfield, CEO of GF. “Our industry began a fundamental shift 15 years ago with the emergence of the smart phone, which brought new features including image sensors, battery management and secure pay. This also led to the Internet of Things that’s now moving from all things connected to all things intelligent. Gary Dickerson and team saw this trend early on and created a group dedicated to innovation on adding features to semiconductor products on all nodes. Today at GF, we leverage much of Applied’s capabilities for the technologies we innovate and manufacture.”

To support the sustainable growth of the semiconductor industry, Applied underscored its ESG commitments with initiatives that are being driven within the company and in collaboration with suppliers, customers and the computing industry.

“Micron is highly committed to reducing our environmental impact,” said Sanjay Mehrotra, president and CEO of Micron. “We appreciate how Applied Materials has embraced similar goals and made strong commitments to increase the eco-efficiency of its manufacturing systems.”

2024 Financial Model

In the base case assumptions of its 2024 financial model, Applied plans to grow revenue by over 55 percent and non-GAAP EPS by more than 100 percent as compared to fiscal 2020. It plans to increase Semiconductor Systems revenue by over 60 percent. The company announced a commitment to return between 80 and 100 percent of free cash flow to shareholders.

Applied plans to grow its services business by over 45 percent as it increasingly moves beyond transactional parts and maintenance to comprehensive services delivered via subscription to give customers better outcomes from lab to fab. Key to the growth strategy is expanding the use of digital services and remote capabilities that use sensors, analytics and AI.

In its Display business, Applied expects to benefit from the next wave of OLED growth as the technology becomes more pervasive in smartphones, notebook PCs, tablets and TVs. Applied plans to increase annual operating margin in its Display business to around $600 million dollars on average over the four years ending 2024.

“The growth momentum in our reporting segments is the foundation of our new target financial model,” said Dan Durn, senior vice president and CFO of Applied Materials. “Combined with our focus on execution, discipline and resulting margin improvements, we plan to drive a high-ROI model that generates strong free cash flow and attractive shareholder returns.”

A replay of the Applied Materials Investor Meeting, along with the presentation and related materials, are available on the company’s website at http://www.appliedmaterials.com/company/investor-relations.

Non-GAAP and Other Financial Measures
Free cash flow is defined as operating cash flow, less net capital expenditures. Reconciliations of non-GAAP to GAAP measures are contained in the 2021 Investor Meeting presentation, which is available on the investor page of the company’s website. The non-GAAP adjusted EPS and gross and operating margin targets assume non-GAAP adjustments as applicable for future periods, which we are unable to predict without unreasonable efforts due to their inherent uncertainty. Management uses non-GAAP adjusted financial measures to evaluate the company’s operating and financial performance and for planning purposes. Applied believes these measures enhance investors’ ability to review the company’s business from the same perspective as the company’s management, and facilitate comparisons between periods on a consistent basis. There are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies.

Forward-Looking Statements
This release contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks and demand drivers, technology transitions, our business and financial performance and market share positions, our capital allocation and cash deployment strategies, our investment and growth strategies, our development of new products and technologies, our business outlook through fiscal 2024, and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products; global economic and industry conditions; the effects of regional or global health epidemics, including the severity and duration of the ongoing COVID-19 pandemic; global trade issues and changes in trade and export license policies, including the recent rules and interpretations promulgated by the U.S. Department of Commerce expanding export license requirements for certain products sold to certain entities in China; consumer demand for electronic products; the demand for semiconductors; customers’ technology and capacity requirements; the introduction of new and innovative technologies, and the timing of technology transitions; our ability to develop, deliver and support new products and technologies; the concentrated nature of our customer base; acquisitions, investments and divestitures; changes in income tax laws; our ability to expand our current markets, increase market share and develop new markets; market acceptance of existing and newly developed products; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives, align our resources and cost structure with business conditions, and attract, motivate and retain key employees; the variability of operating expenses and results among products and segments, and our ability to accurately forecast future results, market conditions, customer requirements and business needs; our ability to ensure compliance with applicable law, rules and regulations; and other risks and uncertainties described in our SEC filings, including our recent Forms 10-Q and 8-K. All forward-looking statements are based on management’s current estimates, projections and assumptions, and we assume no obligation to update them.

About Applied Materials
Applied Materials, Inc. (Nasdaq: AMAT) is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible the technology shaping the future. Learn more at www.appliedmaterials.com.

Contact:
Ricky Gradwohl (editorial/media) 408.235.4676
Michael Sullivan (financial community) 408.986.7977

Photos accompanying this announcement are available at:

https://www.globenewswire.com/NewsRoom/AttachmentNg/81aef57e-f640-4c78-93d7-e4839b652b0b

https://www.globenewswire.com/NewsRoom/AttachmentNg/d8b4df32-f2f9-44f7-a549-d9d20480a611

AMAT – Analysts Are Raising Their Price Targets on Applied Materials Stock

Shares of Applied Materials have surged 18% so far this year.


David Paul Morris/Bloomberg

A surge in demand for chips used in products ranging from appliances to automobiles has created a favorable environment for semiconductor businesses that is likely to continue this year. One of the ways investors have sought to profit from the shortage is by owning stocks of companies that make the equipment used to manufacture chips.


Applied Materials

(ticker: AMAT) is one such name, and two analysts increased their price targets on the stock ahead of the company’s planned investor event on Tuesday. Applied Materials stock gained 1.1% to $143.05 on Monday, as the

PHLX Semiconductor index,

or Sox, rose 2%.

Credit Suisse analyst John Pitzer raised his target price to $175 from $145 on Sunday and reiterated the equivalent of a Buy rating on shares. Pitzer wrote that some investors may regard Tuesday’s event as a “sell-the-news” opportunity, but doing so would be a mistake, he noted.

Pitzer argued that investors can do well with Applied Materials shares because it has become very costly to expand chip manufacturing capabilities. The U.S. government has also signaled the importance of retaining and growing domestic manufacturing capacity, which could lead to demand for Applied’s products. Applied Materials stock is also cheap, Pitzer said.

“While cyclicality is a risk, the secular backdrop supports higher highs and higher lows meaning [earnings of greater than $10 a share in the long term] is NOT a peak but a new base off of which to drive further growth,” Pitzer wrote.

Stifel analyst Patrick Ho also raised his target price on Sunday, bumping it to $160 from $140. Ho also has a Buy rating on the stock. Applied’s higher valuation is warranted, he said, because Tuesday’s investor day will be positive for the stock.

He expects executives to outline a new financial model on Tuesday that highlights what the company is capable of in terms of earnings and cash flow generation. “We believe that its earnings leverage has been underestimated (including by us) and management’s update will showcase the continued improvements made on this front,” Ho wrote.

According to Ho’s calculations, the company should be able to produce earnings of about $8 a share, assuming annual revenue reaches $25 billion. At the moment, analysts expect earnings of $6 a share on sales of $21.7 billion for this year. Applied said that it expects to report its fiscal second-quarter results on May 20.

Of the analysts that cover Applied Materials, 25 rate it a Buy and four have a Hold rating. A single analyst advises investors to sell shares. The average target price is $143.73, which implies the stock will fall less than 1% in the next year.

Applied Materials is set to hold its investor day Tuesday, kicking off at 11 a.m. Eastern time.

Applied Materials shares have surged 242% in the past year as the Sox has advanced 128%. The

S&P 500 index

gained 64% in the same period.

Write to Max.Cherney@barrons.com