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Applied Materials Inc AMAT

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Applied Materials Ends Its Fiscal 2020 On a High Note; Raising FVE to $74, Shares Fairly Valued

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

Applied Materials reported fiscal fourth-quarter results above the midpoint of management’s guidance, while guiding fiscal first-quarter revenue to be above our prior estimate. We note Applied and its peers have all claimed that customer demand has remained strong despite the uncertain economic climate stemming from the coronavirus, which we attribute primarily to equipment investments related to critical technology transitions and multiyear trends such as AI, 5G, and cloud computing. Additionally, demand from domestic Chinese chipmakers has also grown significantly in 2020, as China looks to reduce its reliance on foreign semiconductors. Applied supplies equipment to the Chinese foundry SMIC and was forced to halt shipments two months into its fourth quarter as a result of the latest U.S. government restriction. This requirement reduced sales for the fourth quarter and Applied’s first-quarter guidance. Despite this headwind, management expects first quarter sales to be up 19% at the midpoint. 

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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.

Contact
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, 2020
Fiscal Year End Oct 27, 2020
Stock Type Cyclical
Employees 24,000

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