Applied Materials Inc
Applied Materials Inc
IBD Stock Analysis
- Shares currently in seven-week consolidation; buy point at 146.10
- Aggressive investors could have bought near 133.10 off 10-week line
- Several analysts increased price targets after company’s quarterly report
Industry Group Ranking
* Not real-time data. All data shown was captured at
1:38PM EDT on
Late Thursday, the Santa Clara, Calif.-based company easily beat Wall Street’s targets for its fiscal second quarter and guided higher for the current period.
Applied Materials earned an adjusted $1.63 a share on sales of $5.58 billion in the quarter ended May 2. On a year-over-year basis, Applied Materials earnings rose 83% while sales climbed 41%. It was the company’s best sales and earnings growth in four years.
For the current quarter, Applied Materials forecast adjusted earnings of $1.76 a share on sales of $5.92 billion, based on the midpoint of its outlook. That would translate to year-over-year growth of 66% in earnings and 35% in sales.
Unusually Strong Long-Term Guidance
Robert Maire, president of Semiconductor Advisors, said the guidance from Applied Materials was surprisingly robust.
“Applied went way ahead of its normal conservative guidance to say that the second half of 2021 will be up over the first half and 2022 will be up over that,” Maire said in a note to clients.
He added, “Applied management obviously has enough confidence in orders going forward to predict almost two years of growth. That kind of confidence in this industry is highly unusual. So, we think they are getting very strong signals over the long term from customers including some very large capex spending projections from the largest players.”
Applied Materials and other chip gear vendors are benefiting as chipmakers add capacity in response to widespread chip shortages.
AMAT Stock Bounces Off 10-Week Line
However, AMAT stock could have been a buy for aggressive investors as it climbed back above its 10-week moving average line, near 133.10, according to IBD Leaderboard analysis. It also broke out of a downtrend, a positive sign.
On Monday, IBD trading experts added AMAT stock to the Leaderboard and SwingTrader stock lists.
On the stock market today, AMAT stock climbed 4.6% to 134.58.
AMAT stock has an IBD Relative Strength Rating of 90. That means it has outperformed 90% of stocks over the past 12 months.
Chip Gear Spending Cycle Has Legs
Several Wall Street analysts increased their price targets on AMAT stock after the company’s beat-and-raise quarterly report.
Susquehanna Financial Group analyst Mehdi Hosseini maintained his positive rating on AMAT stock and upped his price target to 170 from 155.
Hosseini believes the current uptrend in semiconductor equipment spending will continue for a while.
“Unlike prior uptrends, this cycle could actually sustain into 2023,” he said in a note to clients. “What makes this time different is the increased efforts to localize semiconductor manufacturing while end markets are continuing to diversify beyond smartphones.”
D.A. Davidson analyst Thomas Diffely reiterated his buy rating on AMAT stock with a price target of 165.
“While peak cycle concerns may arise, we feel the business (and stock) has plenty of room to run,” he said in a note to clients. “This view is supported by the massive multiyear, multi-$100 billion investment plans announced by the industry’s largest spenders.”
AMAT Stock Ranks Sixth In Industry Group
AMAT stock ranks No. 6 out of 31 stocks in IBD’s semiconductor equipment industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 96 out of 99. IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
The semiconductor equipment stock group ranks No. 42 out of 197 industry groups that IBD tracks. Choosing highly rated stocks from leading industry groups in a confirmed stock market uptrend generally increases your chances of making profits in growth stocks.
Ahead of AMAT stock, The top ranked stocks in the group are ASML (ASML), Kulicke & Soffa Industries (KLIC) and Onto Innovation (ONTO). Those three chip gear stocks each have an IBD Composite Rating of 98.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
YOU MAY ALSO LIKE: