Applied Materials Stock: Analysts still Bullish Post-Q3 Results?

Utilized Supplies, Inc. (AMAT) reported stellar third-quarter outcomes on Thursday. The corporate posted its strongest revenues ever ($6.2 billion), a leap of 41% year-over-year, surpassing the Road’s estimate of $5.94 billion. Adjusted earnings got here in at $1.90 per share, up 79% from the year-ago interval. Analysts had estimated earnings of $1.77 per share.

For This autumn, AMAT has projected internet gross sales of $6.33 billion, give or take $250 million. Non-GAAP adjusted diluted EPS is anticipated to return in between $1.87 to $2.01.

The corporate operates in three segments: Semiconductor Programs, Utilized International Companies (AGS), and Show and Adjoining Markets.

Let’s briefly take a look at these three segments and see why analysts are bullish on the inventory. (See AMAT stock charts on TipRanks)

Foundry-logic – Key to Success

Semiconductor Programs made up virtually 72% of the corporate’s whole income in Q3. This enterprise phase “develops, manufactures and sells a variety of producing tools used to manufacture semiconductor chips, additionally known as built-in circuits (ICs).”

AMAT anticipates this enterprise phase to earn revenues of $4.6 billion in This autumn, a leap of fifty% year-over-year.

The corporate’s foundry-logic enterprise, part of Semiconductor Programs, was the fastest-growing wafer fab tools (WFE) market in 2021; incomes over 55% of whole buyer funding.

Utilized Supplies CFO Dan Durn acknowledged, “As we glance into 2022, we do see the general WFE market up year-over-year. We see continued energy in all three machine sorts, foundry-logic, DRAM, NAND. And so we like how nicely we’re positioned in opposition to that chance.”

The corporate indicated on its earnings name that demand for its chips is broad throughout all kinds of nodes, and reminiscence. Greater than 50% of AMAT’s foundry-logic income is being generated by way of its ICAPS (IoT, Communications, Automotive, Energy and Sensors) enterprise.

Show, Utilized International Companies Segments

The corporate’s Show and Adjoining Markets income got here in at $431 million, with an working margin of 23%. In fiscal This autumn, AMAT expects show revenues of $400 million. AMAT continued to be optimistic about this enterprise due rising demand for 5G natural light-emitting diode (OLED) handsets, growing display sizes, rising panel costs, and foldable shows.

The AGS enterprise had internet gross sales of $1.29 billion in Q3, a rise of 24% year-over-year. In This autumn, the corporate expects this enterprise to earn $1.3 billion in income, up 18% year-over-year.

AGS additionally crossed an working margin of 30% for the primary time previously 15 years.

Wall Road’s Take

The sturdy Q3 outcomes prompted Susquehanna analyst Mehdi Hosseini to reiterate a Purchase ranking, and a worth goal of $170 (34.9% upside) on the inventory. The analyst was of the opinion that AMAT was benefitting from “structural modifications within the semiconductor business.”

Hosseini believed that his earlier thesis on the inventory “is enjoying out, significantly available on the market share acquire entrance. To that finish, it’s encouraging to see consensus has moved larger in direction of our Road excessive.”

Nevertheless, the analyst cautioned that the inventory may run into “an air pocket by spring of 2022, particularly as clients await the completion of recent fab development, although we await for incremental coloration which might not be accessible till the October time-frame.”

Turning to the remainder of the Road, consensus is that Utilized Supplies is a Robust Purchase, primarily based on 10 Buys and three Holds. The average Applied Materials price target of $160.75 implies 26.9% upside potential from present ranges.

Disclosure: Shrilekha Pethe held no place in any of the shares talked about on this article on the time of publication.

Disclaimer: The knowledge contained herein is for informational functions solely. Nothing on this article must be taken as a solicitation to buy or promote securities.

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