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Applied Materials Inc AMAT

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Applied Materials' Q4 Results not Immune to Shortages, Demand Remains Strong, Raising FVE to $142

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

Wide-moat Applied Materials reported fiscal fourth-quarter revenue below the midpoint of management’s guidance, with supply chain constraints negatively affecting sales by at least $300 million. Ironically, Applied is having challenges procuring certain chips for its equipment from suppliers that are also the firm's customers, particularly in logic, power, and analog chips. Positively, management sees a healthy demand environment, with wafer fab equipment, or WFE, spending expected to be up again in 2022. We estimate 2021 WFE to be in the mid-$80 billion range (up from $65 billion in 2020). The firm boasts a backlog of $11.8 billion, which is up 77% relative to the same period last year. Consequently, we are raising our fair value estimate to $142 per share from $131, as we roll our model forward and incorporate a stronger outlook for 2022.

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Company Profile

Business Description

Applied Materials is the world's largest supplier of semiconductor manufacturing equipment, providing materials engineering solutions to help make nearly every chip in the world. The firm's systems are used in nearly every major process step with the exception of lithography. Key tools include those for chemical and physical vapor deposition, etching, chemical mechanical polishing, wafer- and reticle-inspection, critical dimension measurement, and defect-inspection scanning electron microscopes.

3050 Bowers Avenue, P.O. Box 58039
Santa Clara, CA, 95052-8039
T +1 408 727-5555
Sector Technology
Industry Semiconductor Equipment & Materials
Most Recent Earnings Oct 31, 2021
Fiscal Year End Oct 31, 2022
Stock Type Cyclical
Employees 27,000