We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
For the fiscal fourth quarter, AMAT expects net sales of $6.93 billion (+/-$400 million). The Zacks Consensus Estimate for revenues is pegged at $6.94 billion, suggesting a rise of 3.2% from the year-ago quarter’s reading.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Applied Materials projects non-GAAP earnings in the range of $2.00-$2.36 per share. The Zacks Consensus Estimate for earnings is pegged at $2.18 per share, indicating growth of 2.8% from the year-ago quarter’s reported figure. The figure has been unchanged over the past 60 days.
Image Source: Zacks Investment Research
AMAT has an impressive earnings surprise history. In the last reported quarter, the company delivered an earnings surprise of 5.5%. Its earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 7.7%.
Applied Materials, Inc. Price, Consensus and EPS Surprise
Our proven model does not conclusively predict an earnings beat for Applied Materials this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
Though AMAT carries a Zacks Rank #3, it has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Factors to Influence Applied Materials’ Q4 Results
Applied Materials’ technology leadership in leading-edge logic, compute memory or high-performance DRAM, stacking technology and advanced packaging is expected to have helped it capitalize on the growing proliferation of artificial intelligence (AI), which is the main reason behind the rebound in the semiconductor industry this year.
Increasing demand for sophisticated chips required to power AI-centric data centers is expected to have aided the performance of the company’s Semiconductor Systems segment in the fiscal fourth quarter. Its strong capabilities in logic and solid position in DRAM patterning are likely to have acted as boons. Its patterning systems and technologies, which are designed to address the shrinking pattern dimension challenges and the growing complexity in vertical stacking, are likely to have benefited the segment.
AMAT’s manufacturing equipment, which helps improve the performance, power, yield and costs of semiconductor devices that serve the IoT, communications, automotive, power and sensors markets, is likely to have contributed well to the top-line growth of the segment.
However, the escalating tensions between the United States and China do not bode well for semiconductor companies. These are likely to have hindered the top-line growth of the segment. Changes in the spending patterns of key customers and supply-chain constraints are likely to have been other headwinds. For the fourth quarter of fiscal 2024, the company’s sales projection for Semiconductor Systems is pegged at $5.1 billion. The Zacks Consensus Estimate is pegged at $5.11 billion, indicating growth of 4.6% from the year-ago quarter’s actual.
Applied Materials’ growing 200-millimeter business and solid momentum among long-term service agreements are likely to have driven sales growth in its Applied Global Services (“AGS”) segment in the quarter under review. Strengthening of the subscription business is likely to have been another tailwind. For the fourth quarter of fiscal 2024, Applied Materials’ projection for AGS sales is pegged at $1.61 billion. The Zacks Consensus Estimate is also pegged at $1.61 billion, indicating growth of 9.5% from the year-ago quarter’s reported figure.
However, weak spending in the LCD equipment market is likely to have hurt Applied Materials’ Display and Adjacent Markets segment sales in the to-be-reported quarter. For the fourth quarter, it projects revenues of around $200 million from this segment. The consensus mark for the Display and Adjacent Markets segment’s fourth-quarter revenues is pegged at $200.2 million, implying a year-over-year decline of 32.8%.
Applied Materials’ Price Performance & Valuation
Applied Materials shares have risen 16.5% on a year-to-date (YTD) basis, outperforming the Zacks Semiconductor Equipment - Wafer Fabrication industry’s decline of 1.9%. However, the stock has underperformed the Zacks Computer and Technology sector and the S&P 500 index’s YTD rise of 29.6% and 26.4%, respectively.
Compared with other industry peers, Applied Materials stock has outperformed ASML Holding (ASML - Free Report) , Lam Research (LRCX - Free Report) and Advanced Energy Industries (AEIS - Free Report) . Shares of ASML and Lam Research have plunged 11.5% and 2.7%, respectively, while Advanced Energy Industries stock rose 7.5% YTD.
YTD Price Return Performance
Image Source: Zacks Investment Research
Let us now look at the value Applied Materials offers to its investors at current levels. AMAT is currently trading at a discount with a forward 12-month price-to-earnings (P/E) of 19.7X compared with the industry’s 23X. Industry peers, such as ASML Holding, Lam Research and Advanced Energy Industries, have a forward 12-month P/E of 26.77X, 20.39X and 25.72X, respectively.
Image Source: Zacks Investment Research
Investment Thesis on Applied Materials
Applied Materials’ business continues to be on a growth trajectory with significant design wins. It is well-poised to capitalize on the technology-inflection-led growing demand for next-generation chips on the back of its product innovations and leadership in leading-edge logic, compute memory, high bandwidth memory and advanced packaging. Given that AI has become mainstream in several industries and sectors, the company’s strategic pivot toward technology is a major positive.
However, Applied Materials faces near-term challenges that could impact its stock. The U.S.-China trade tensions, particularly the restrictions on high-tech exports to China, have created uncertainties for companies operating in the semiconductor industry. AMAT’s reliance on China for a significant portion of its revenues makes it vulnerable to geopolitical risks, especially as China pushes for self-sufficiency in critical industries like semiconductors.
Conclusion: Hold AMAT Stock for Now
Despite the near-term headwinds, Applied Materials' leadership in semiconductor manufacturing technology, strong market position and discounted valuation make it a solid stock to hold for long-term investors. While the company may face challenges related to trade tensions and increasing competition, its long-term growth prospects remain bright due to the rising demand for advanced chips and continued innovation in semiconductor manufacturing processes.
For investors already holding AMAT stock, maintaining the position seems prudent as the company is well-positioned to benefit from the ongoing digital transformation across industries. Holding Applied Materials allows for potential gains as these long-term trends play out.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Shutterstock
Should AMAT Stock be Part of Your Portfolio Ahead of Q4 Earnings?
Applied Materials (AMAT - Free Report) is scheduled to report fourth-quarter fiscal 2024 results on Nov. 14.
For the fiscal fourth quarter, AMAT expects net sales of $6.93 billion (+/-$400 million). The Zacks Consensus Estimate for revenues is pegged at $6.94 billion, suggesting a rise of 3.2% from the year-ago quarter’s reading.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Applied Materials projects non-GAAP earnings in the range of $2.00-$2.36 per share. The Zacks Consensus Estimate for earnings is pegged at $2.18 per share, indicating growth of 2.8% from the year-ago quarter’s reported figure. The figure has been unchanged over the past 60 days.
Image Source: Zacks Investment Research
AMAT has an impressive earnings surprise history. In the last reported quarter, the company delivered an earnings surprise of 5.5%. Its earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 7.7%.
Applied Materials, Inc. Price, Consensus and EPS Surprise
Applied Materials, Inc. price-consensus-eps-surprise-chart | Applied Materials, Inc. Quote
Earnings Whispers for Applied Materials
Our proven model does not conclusively predict an earnings beat for Applied Materials this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
Though AMAT carries a Zacks Rank #3, it has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Factors to Influence Applied Materials’ Q4 Results
Applied Materials’ technology leadership in leading-edge logic, compute memory or high-performance DRAM, stacking technology and advanced packaging is expected to have helped it capitalize on the growing proliferation of artificial intelligence (AI), which is the main reason behind the rebound in the semiconductor industry this year.
Increasing demand for sophisticated chips required to power AI-centric data centers is expected to have aided the performance of the company’s Semiconductor Systems segment in the fiscal fourth quarter. Its strong capabilities in logic and solid position in DRAM patterning are likely to have acted as boons. Its patterning systems and technologies, which are designed to address the shrinking pattern dimension challenges and the growing complexity in vertical stacking, are likely to have benefited the segment.
AMAT’s manufacturing equipment, which helps improve the performance, power, yield and costs of semiconductor devices that serve the IoT, communications, automotive, power and sensors markets, is likely to have contributed well to the top-line growth of the segment.
However, the escalating tensions between the United States and China do not bode well for semiconductor companies. These are likely to have hindered the top-line growth of the segment. Changes in the spending patterns of key customers and supply-chain constraints are likely to have been other headwinds. For the fourth quarter of fiscal 2024, the company’s sales projection for Semiconductor Systems is pegged at $5.1 billion. The Zacks Consensus Estimate is pegged at $5.11 billion, indicating growth of 4.6% from the year-ago quarter’s actual.
Applied Materials’ growing 200-millimeter business and solid momentum among long-term service agreements are likely to have driven sales growth in its Applied Global Services (“AGS”) segment in the quarter under review. Strengthening of the subscription business is likely to have been another tailwind. For the fourth quarter of fiscal 2024, Applied Materials’ projection for AGS sales is pegged at $1.61 billion. The Zacks Consensus Estimate is also pegged at $1.61 billion, indicating growth of 9.5% from the year-ago quarter’s reported figure.
However, weak spending in the LCD equipment market is likely to have hurt Applied Materials’ Display and Adjacent Markets segment sales in the to-be-reported quarter. For the fourth quarter, it projects revenues of around $200 million from this segment. The consensus mark for the Display and Adjacent Markets segment’s fourth-quarter revenues is pegged at $200.2 million, implying a year-over-year decline of 32.8%.
Applied Materials’ Price Performance & Valuation
Applied Materials shares have risen 16.5% on a year-to-date (YTD) basis, outperforming the Zacks Semiconductor Equipment - Wafer Fabrication industry’s decline of 1.9%. However, the stock has underperformed the Zacks Computer and Technology sector and the S&P 500 index’s YTD rise of 29.6% and 26.4%, respectively.
Compared with other industry peers, Applied Materials stock has outperformed ASML Holding (ASML - Free Report) , Lam Research (LRCX - Free Report) and Advanced Energy Industries (AEIS - Free Report) . Shares of ASML and Lam Research have plunged 11.5% and 2.7%, respectively, while Advanced Energy Industries stock rose 7.5% YTD.
YTD Price Return Performance
Image Source: Zacks Investment Research
Let us now look at the value Applied Materials offers to its investors at current levels. AMAT is currently trading at a discount with a forward 12-month price-to-earnings (P/E) of 19.7X compared with the industry’s 23X. Industry peers, such as ASML Holding, Lam Research and Advanced Energy Industries, have a forward 12-month P/E of 26.77X, 20.39X and 25.72X, respectively.
Image Source: Zacks Investment Research
Investment Thesis on Applied Materials
Applied Materials’ business continues to be on a growth trajectory with significant design wins. It is well-poised to capitalize on the technology-inflection-led growing demand for next-generation chips on the back of its product innovations and leadership in leading-edge logic, compute memory, high bandwidth memory and advanced packaging. Given that AI has become mainstream in several industries and sectors, the company’s strategic pivot toward technology is a major positive.
However, Applied Materials faces near-term challenges that could impact its stock. The U.S.-China trade tensions, particularly the restrictions on high-tech exports to China, have created uncertainties for companies operating in the semiconductor industry. AMAT’s reliance on China for a significant portion of its revenues makes it vulnerable to geopolitical risks, especially as China pushes for self-sufficiency in critical industries like semiconductors.
Conclusion: Hold AMAT Stock for Now
Despite the near-term headwinds, Applied Materials' leadership in semiconductor manufacturing technology, strong market position and discounted valuation make it a solid stock to hold for long-term investors. While the company may face challenges related to trade tensions and increasing competition, its long-term growth prospects remain bright due to the rising demand for advanced chips and continued innovation in semiconductor manufacturing processes.
For investors already holding AMAT stock, maintaining the position seems prudent as the company is well-positioned to benefit from the ongoing digital transformation across industries. Holding Applied Materials allows for potential gains as these long-term trends play out.