S&P 500   3,280.81 (+-0.01%)
DOW   27,050.94 (-0.36%)
QQQ   267.81 (+0.11%)
AAPL   109.89 (-0.17%)
MSFT   203.23 (+0.34%)
FB   249.47 (+0.53%)
GOOGL   1,438.58 (+0.59%)
AMZN   3,037.70 (+2.61%)
NVDA   489.93 (-2.15%)
TSLA   421.32 (-6.25%)
BABA   270.78 (-1.11%)
CGC   15.57 (-1.08%)
GE   6.28 (-1.10%)
MU   48.95 (-0.41%)
AMD   75.68 (-2.90%)
T   28.65 (+0.07%)
F   6.80 (-1.02%)
ACB   6.46 (+2.22%)
GILD   63.52 (-1.07%)
NFLX   483.52 (-0.79%)
DIS   125.70 (+0.23%)
BAC   24.10 (-1.51%)
BA   155.67 (-0.43%)
S&P 500   3,280.81 (+-0.01%)
DOW   27,050.94 (-0.36%)
QQQ   267.81 (+0.11%)
AAPL   109.89 (-0.17%)
MSFT   203.23 (+0.34%)
FB   249.47 (+0.53%)
GOOGL   1,438.58 (+0.59%)
AMZN   3,037.70 (+2.61%)
NVDA   489.93 (-2.15%)
TSLA   421.32 (-6.25%)
BABA   270.78 (-1.11%)
CGC   15.57 (-1.08%)
GE   6.28 (-1.10%)
MU   48.95 (-0.41%)
AMD   75.68 (-2.90%)
T   28.65 (+0.07%)
F   6.80 (-1.02%)
ACB   6.46 (+2.22%)
GILD   63.52 (-1.07%)
NFLX   483.52 (-0.79%)
DIS   125.70 (+0.23%)
BAC   24.10 (-1.51%)
BA   155.67 (-0.43%)
S&P 500   3,280.81 (+-0.01%)
DOW   27,050.94 (-0.36%)
QQQ   267.81 (+0.11%)
AAPL   109.89 (-0.17%)
MSFT   203.23 (+0.34%)
FB   249.47 (+0.53%)
GOOGL   1,438.58 (+0.59%)
AMZN   3,037.70 (+2.61%)
NVDA   489.93 (-2.15%)
TSLA   421.32 (-6.25%)
BABA   270.78 (-1.11%)
CGC   15.57 (-1.08%)
GE   6.28 (-1.10%)
MU   48.95 (-0.41%)
AMD   75.68 (-2.90%)
T   28.65 (+0.07%)
F   6.80 (-1.02%)
ACB   6.46 (+2.22%)
GILD   63.52 (-1.07%)
NFLX   483.52 (-0.79%)
DIS   125.70 (+0.23%)
BAC   24.10 (-1.51%)
BA   155.67 (-0.43%)
S&P 500   3,280.81 (+-0.01%)
DOW   27,050.94 (-0.36%)
QQQ   267.81 (+0.11%)
AAPL   109.89 (-0.17%)
MSFT   203.23 (+0.34%)
FB   249.47 (+0.53%)
GOOGL   1,438.58 (+0.59%)
AMZN   3,037.70 (+2.61%)
NVDA   489.93 (-2.15%)
TSLA   421.32 (-6.25%)
BABA   270.78 (-1.11%)
CGC   15.57 (-1.08%)
GE   6.28 (-1.10%)
MU   48.95 (-0.41%)
AMD   75.68 (-2.90%)
T   28.65 (+0.07%)
F   6.80 (-1.02%)
ACB   6.46 (+2.22%)
GILD   63.52 (-1.07%)
NFLX   483.52 (-0.79%)
DIS   125.70 (+0.23%)
BAC   24.10 (-1.51%)
BA   155.67 (-0.43%)
Log in

Applied Materials (NASDAQ:AMAT) Is Another 2nd-Half Winner You Need To Own

Friday, August 14, 2020 | Chris Markoch
Applied Materials (NASDAQ:AMAT) Is Another 2nd-Half Winner You Need To OwnThere’s 20% Upside For Applied Materials, At Least

It wasn’t all that long ago that analysts at Wedbush and Bank American issued some very bullish comments on the tech-sector. Wedbush said they see another 20% to 30% upside for secular tech-winners. The shift to digital accelerated with the onset of COVID and that shift means revenue and profits for the established and proven tech-leaders. Bank of America chimed in with positive comments on the chip-makers, a fundamental aspect of technology, with strength expected from the gaming sector.

While I agree with both commentaries, I myself prefer companies like KLA Corporation (NASDAQ:KLAC) and Applied Materials (NASDAQ:AMAT) because they make the equipment you need to make the chips. The types of chips will come and go but we’ll always need the equipment to make newer, faster chips and, with the onset of the 5G revolution, the demand for chips is going to skyrocket. What many in the media have failed to recognize is the long-awaited explosion of the IoT is heavily dependent on 5G.

“By addressing our customers’ highest value problems, Applied is outperforming today and is positioned to grow faster than our markets over the next several years,” said Gary Dickerson, president and CEO of Applied Materials in the 2Q press release.

Applied Materials Beats Consensus And Raises Guidance

Applied Materials issued a 2nd quarter earnings report (FQ3) any company would be proud of. The only negative is GAAP EPS fell short of consensus by $0.03 (about 4%) but that is easy to overlook. On the top line, revenue grew 23.6% or just over 500 basis points better than the consensus target. Adjusted gross margins and operating margins both improved delivering solid results for Adj EPS, $1.06 versus the $0.95 expected.

Semi-conductor systems, the company’s largest segment, grew 28% over the last year to bring in $2.9 billion in revenue. Foundry and Logic increased to 55% of the mix. Services and Display also grew on a YOY basis, 11%, and 3% respectively.

Looking forward, the company is expecting to see revenue and EPS grow on a sequential and YOY basis. For the top line, AMAT is expecting revenue in the range of $4.4 to $4.8 billion (target $4.6 billion) versus the consensus $4.35. For the bottom line, AMAT is expecting EPS in the range of $1.11 to $1.23 versus the consensus $1.02.

Regarding the analysts, the analysts are bullish on this stock but perhaps not bullish enough. With the 3Q results in the bag and Q4 consensus at $1.16, the company is firmly on track to beat FY consensus. Considering the fact the company beat in the 3rd quarter is expecting strength in the 4th, and we got a similar message from competitor KLA Corporation the odds are good 4th quarter results will smash the current consensus. And that's why some analysts are already raising their targets.

Applied Materials Dividend Is Worth A Look

The yield with shares of Applied Materials is not as high as I like to see, only about 1.30% with prices near $65, but its good enough and as safe as can be. The payout of $0.88 is only about 22% of earnings and there is ample free-cash-flow to increase the dividend further. There have only been three consecutive current distribution increases, not a lot I know, but the history of increase is good. Over the last ten or so years there have been 7 increases and the last three have been substantial. The 5-year CAGR is over 15% which is something I like to see because it means aggressive growth of the Yield-on-Investment.

The Technical Outlook: Applied Materials Is On The Verge Of A Major Break Out

The 2Q report has shares up more than 3.5% in early action and trading above the all-time closing high and just shy of the all-time intraday high. The move is a confirmation of the uptrend that began with the March low but there is a warning. With shares trading so close to a resistance point and already up off of the moving average waiting for a clear break-out is the best thing to do. At this point, a firm move up from the all-time high may not be enough; a close above the all-time intraday high would be a much better signal.

Applied Materials (NASDAQ:AMAT) Is Another 2nd-Half Winner You Need To Own

Companies Mentioned in This Article

CompanyBeat the Market™ RankCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Applied Materials (AMAT)2.5$57.02-0.5%1.54%16.58Buy$73.52
KLA (KLAC)2.4$178.40-1.5%2.02%23.20Buy$209.13
Compare These Stocks  Add These Stocks to My Watchlist 

8 Stocks You Can Count On During Any Crisis

Depending on how you look at it, the economic outlook is getting cloudier or clearer.

The argument for a cloudy economy is easy to make. Multiple times of day we hear about more Americans testing positive for the novel coronavirus. The worldwide number of positive tests exceeds one million. And unfortunately, it will go higher. We just don’t know by how much.

But there are two parts to this ongoing situation. The first is the real-time science experiment as the world attempts to flatten the curve. The other is the very real economic impact. And the numbers of the economic carnage are coming in faster than any significant evidence of a flattening curve.

The number of unemployed now exceeds six million and will only rise. The government is throwing everything including the kitchen sink at the problem. But it’s an experiment in real-time. We won’t know the results for some time.

But even while we wait for a new normal to return, there are ways for you to profit. There are companies that are keeping our economy going now, and have a business model that sets them up well for success after the pandemic is over.

View the "8 Stocks You Can Count On During Any Crisis".

Enter your email address below to receive a concise daily summary of analysts' upgrades, downgrades and new coverage with MarketBeat.com's FREE daily email newsletter.