Applied Materials, Inc. (AMAT - Free Report) is currently one of the top-performing stocks in the technology sector, and an increase in share price and strong fundamentals signal it’s bull run. Therefore, if you haven’t taken advantage of the share price appreciation yet, it’s time you add the stock to your portfolio.
The company has performed extremely well this year and has potential to carry on the momentum in the near term.
Why an Attractive Pick?
Share Price Appreciation: A glimpse of the company’s price trend shows that the stock had an impressive run on the bourses over the last year. Applied has returned 53.5%, comparing favorably with the S&P 500’s market gain of 15.9%.
Solid Rank & VGM Score: Applied sports a Zacks Rank #2 (Buy) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities. Thus, the company appears to be a compelling investment proposition at the moment.
Northward Estimate Revisions: Seven estimates for the current year have moved north over the past 60 days against one southward revision, reflecting analysts’ confidence in the stock. Over the same period, the Zacks Consensus Estimate for the current year has increased 8%. Also, for fiscal 2019, the Zacks Consensus Estimate has inched up 5% over the same time frame to $4.55.
Positive Earnings Surprise History: Applied has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, with an average positive earnings surprise of 4.76%.
Strong Growth Prospects: The company’s Zacks Consensus Estimate for fiscal 2018 earnings of $4.39 reflects year-over-year growth of 35.1%. Moreover, earnings are expected to register 3.6% growth in fiscal 2019. The stock has a long term expected earnings per share growth rate of 12%.
Growth Drivers: Applied continues to witness technological advancements in semiconductor and display areas. The rising demand for semiconductors and displays aided by the emergence of Internet of Things (IoT), big data and artificial intelligence, cloud infrastructure, virtual reality and smart vehicles, is a tailwind.
Further, the company is well positioned for NAND supply that is required for the growing data storage market. Applied Materials’ market share has gained significantly with its strength in 3D NAND, DRAM and patterning. Management expects increasing DRAM and logic spending in 2018. It is significantly improving its memory market share as well.
In the most recent quarter, Applied Materials witnessed adjusted earnings of $1.06 per share, up 59% from the year-ago period. Total quarterly revenues came in at $4.2 billion, improving more than 28% year over year. Also, the company provided an improving outlook. Management expects robust double-digit growth in semiconductor, display and service businesses in 2018. It expects wafer fab equipment (WFE) market’s combined spending in 2018 and 2019 to reach around $100 billion.
We believe that Applied Materials is in a great position to grow sustainably and profitably based on its strong pipeline of enabling technologies, supported by expanding opportunities on the semiconductor, service and display fronts.
Other Stocks to Consider
Other top-ranked stocks in the broader technology sector are NVIDIA Corporation (NVDA - Free Report) and Lam Research (LRCX - Free Report) , each sporting a Zacks Rank #1, while Advanced Energy Industries, Inc. (AEIS - Free Report) carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings per share growth rate for NVIDIA Corporation, Lam Research and Advanced Energy is projected to be 10.3%, 14.9% and 9%, respectively.
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