Analyst Note| Abhinav Davuluri, CFA |
Wide-moat Applied Materials reported fiscal second-quarter results at the high end of management’s guidance while guiding fiscal third-quarter revenue above our expectations. Applied and its peers have all called for strong growth in 2021, driven by record capital expenditure levels at TSMC and Intel as well as improving DRAM spending. Management expects Applied’s third-quarter revenue to be up 35% year over year at the midpoint, with momentum persisting into the back half of calendar 2021. Consequently, we are raising our fair value estimate to $125 per share from $103. The shares look fairly valued at current levels.