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Layoffs Aren't the Solution to Your Profitability Crisis. Here's the Simple 4-Step Process You Should Be Following Instead.
The "Green Revolution" Creates Massive Opportunity For Investors (Ad)
Three Consumer Stocks That Could Outperform In Q4 
Is the Market Overreacting with Shopify Stock?
The "Green Revolution" Creates Massive Opportunity For Investors (Ad)
MO Money: Why Altria Group Stock is Rallying
British pound plunges to new low as tax cuts spark concern
The "Green Revolution" Creates Massive Opportunity For Investors (Ad)
US stocks slip deeper into a slump as recession fears grow
Lights out, ovens off: Europe preps for winter energy crisis
S&P 500   3,655.04
DOW   29,260.81
QQQ   274.37
Layoffs Aren't the Solution to Your Profitability Crisis. Here's the Simple 4-Step Process You Should Be Following Instead.
The "Green Revolution" Creates Massive Opportunity For Investors (Ad)
Three Consumer Stocks That Could Outperform In Q4 
Is the Market Overreacting with Shopify Stock?
The "Green Revolution" Creates Massive Opportunity For Investors (Ad)
MO Money: Why Altria Group Stock is Rallying
British pound plunges to new low as tax cuts spark concern
The "Green Revolution" Creates Massive Opportunity For Investors (Ad)
US stocks slip deeper into a slump as recession fears grow
Lights out, ovens off: Europe preps for winter energy crisis
S&P 500   3,655.04
DOW   29,260.81
QQQ   274.37
Layoffs Aren't the Solution to Your Profitability Crisis. Here's the Simple 4-Step Process You Should Be Following Instead.
The "Green Revolution" Creates Massive Opportunity For Investors (Ad)
Three Consumer Stocks That Could Outperform In Q4 
Is the Market Overreacting with Shopify Stock?
The "Green Revolution" Creates Massive Opportunity For Investors (Ad)
MO Money: Why Altria Group Stock is Rallying
British pound plunges to new low as tax cuts spark concern
The "Green Revolution" Creates Massive Opportunity For Investors (Ad)
US stocks slip deeper into a slump as recession fears grow
Lights out, ovens off: Europe preps for winter energy crisis

Applied Materials Results Show A Slowing Semiconductor Market

Applied Materials Results Show A Slowing Semiconductor Market

Applied Materials, Inc. (Nasdaq: AMAT)  is an American semiconductor company that supplies equipment, services, and software for the manufacture of semiconductor chips for electronics, computers, smartphones, televisions, and solar-based productions. It is headquartered in San Diego California.

Applied Material posted better than expected results for the third quarter, leading to shares falling by 3% in early-market trading.  Adjusted earnings per share increased by 2%, meanwhile, revenue increased by 5%.

Management states the following:

“Memory spending is expected to be lower than in 2022 as macro uncertainty and weakness in consumer electronics and PCs causes these customers to defer some capacity additions," CEO Gary Dickerson told investors on a conference call late Thursday. “

"Leading-edge foundry-logic looks strong with customers battling for leadership and racing to be first to implement major technology inflections (and) ICAPS customers who serve IoT, communications, auto, power and sensor markets, are reporting areas of strength and weakness,"

Applied Materials revenue is expected to be up 15% for the fiscal year, and management currently expects that 2023 demand is likely to decline from 2022, as macro uncertainty and lower demand for memory-based products are expected to weigh on demand. The leading edge foundry logic division continues to look strong on the other. Demand is also expected to increase from the IoT division, from communications, auto, power, and sensors markets.

The biggest risk remains the consumer-centric market, as demand for PCs and smartphones continues to remain weak. Most semiconductor manufacturers including Samsung Electronics (OTCPK: SSNLF) and Taiwan Semiconductor Manufacturing (NYSE: TSM) have all reduced their capital spending in recent times.


The company’s valuation remains relatively muted considering that the stock is trading at a price-to-earnings of 14x. While the forward earnings are quite cheap at 12x, the semiconductor industry’s cyclical nature will have investors worried, and is likely to keep the stock muted for a while. But the debt to equity remains quite low, at 0.47, which is a positive considering the capital expenditure in recent times.

Excess inventory remains an issue through 2023, as new fabs come onto the market.  Significant new capacity coming onto the market from various sources is a major factor. According to IDC research, “Overall, the semiconductor industry remains on track to deliver another healthy year of growth as the supercycle that began in 2020 continues this year," said Mario Morales, group vice president, Semiconductors at IDC. "The financial and system markets remain narrowly focused on shortages across specific sectors of the supply chain, but what is more important to emphasize is how critical semiconductors are to every major system category and semiconductor content growth that remains unabated over the next five to seven years."

The biggest issue remains the mixed signal the market is sending. Semiconductors have historically gone through a number of cycles, where semiconductor stocks have fallen significantly as a result. And once again issues are slowly starting to show up in the industry. Major semiconductor makers have recently warned that another downcycle might be on the way.

Applied Material’s operations, despite the potential for hiccups, remain relatively strong, and the company produced an operating cash flow of $1.47 billion for the quarter and returned most of the cash back to investors. Year to date Applied Materials has produced a free cash flow of $4 billion.  Operating margins for the business remain healthy at 32% and profit margins have been around 27%, which should help the company maintain operational efficiency and remain solvent during a down cycle.

The stock's technical remains strong with the open interest currently standing at 0.98, which would indicate that the market remains relatively neutral on the stock.  Meanwhile, the RSI-14 remains relatively moderate at around 50, which shows the stock is neither overbought nor oversold.

Overall, Applied Materials remains a stock that is likely to be watched by investors closely as almost a canary in the coal mine, as we could be heading for a reversal in fortunes for semiconductor makers.

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Applied Materials (AMAT)
3.0455 of 5 stars
$82.94-1.6%1.25%11.09Moderate Buy$142.38
Samsung Electronics (SSNLF)
0 of 5 stars
$57.75flatN/A21.55BuyN/A
Taiwan Semiconductor Manufacturing (TSM)
2.9148 of 5 stars
$73.01-1.2%1.93%14.09Moderate Buy$120.14
Compare These Stocks  Add These Stocks to My Watchlist 

Should you invest $1,000 in Applied Materials right now?

Before you consider Applied Materials, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Applied Materials wasn't on the list.

While Applied Materials currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Parth Pala

About Parth Pala

Contributing Author

Parth has been an equity analyst for over a decade, and has covered multiple global markets including the United States, Asia, and Europe. As an analyst, Parth brings a global perspective to his analysis, with a focus on equities that have strong fundamentals. 
Contact Parth Pala via email at parthpala@gmail.com.
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