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- Applied Materials reported higher than expected results and guidance, shares regular.
- The corporate is within the sweet spot regarding trends within the semiconductor industry.
- Capital returns help make this stock a pretty buy for 2023.
- 5 stocks we value more highly than Applied Materials
There are 2 narratives inside the semiconductor industry and Applied Materials (NASDAQ:AMAT) is within the sweet spot regarding 2023. Those narratives are 1) spotty activity inside the industry driven by oversupply and sluggish demand in end-markets like gaming and consumer products and a couple of) a shift toward next-generation technology.
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While corporations like Advanced Microdevices (NASDAQ:AMD) report mixed results, their internals show demand remains to be strong for industrial applications and next-generation technology.
That’s where Applied Materials come into the image. Applied Materials is an element of the infrastructure of the semiconductor industry (NYSEARCA:SOXX) and produces the equipment and services semiconductor foundries must make that next-gen tech. And the outcomes show it.
“While the economy and semiconductor industry are facing challenges in 2023, Applied Materials delivered strong first quarter results, and we consider Applied is well positioned to outperform our markets this yr,” said Gary Dickerson, President and CEO.
“Our resilience is underpinned by our strong positions with leading customers at key technology inflections, large backlog of differentiated products and growing service business.”
Applied Materials had quarter and produced results that outpaced the group and the broader S&P 500 by growing and outperforming the Marketbeat.com consensus estimate. The corporate reported $6.74 billion in net revenue for a gain of seven% over last yr. The revenue beat by $0.080 or about 120 bps, which is slim, but the corporate outperforms in a world where most corporations aren’t.
Coincidentally, even Applied Materials’ internal results prove the twin narrative inside the industry. The segment results have Semiconductor Systems sales up 13% to steer the corporate and is driven by strength within the foundry and related sub-segment. The Applied Global Services segment grew by a smaller 3.74%, however the consumer-oriented Display segment shrank versus last yr.
The salient point is that display is a small contribution to total revenue, and the corporate’s position and diversification are helping it outperform.
The corporate’s margins contracted barely versus last yr, however the contraction was lower than expected and aided by share repurchases. The gross margin contracted by 230 and 220 bps GAAP and adjusted, while the operating margin also contracted by a small amount, but earnings grew in each comparisons versus last yr.
The GAAP earnings set an organization record, and the adjusted grew by 7% to outpace the analyst’s estimates by a dime. The corporate also issued favorable guidance regarding the estimates and already spurred a round of positive analyst commentary.
The Analysts Drive Applied Materials Into A Reversal
The worth motion in Applied Materials hit bottom in 2022 and is on the verge of a full reversal. The outcomes, outlook and subsequent analyst activity, are the rationale why. The analysts, specifically, have issued not less than 6 price goal upgrades because the Q1 release and so they have the value goal moving higher after hitting bottom over the past quarter.
The brand new consensus is about 7% above the value motion, which isn’t much however it is above key resistance. The neckline of a Hear & Shoulders Pattern is on the $120 level and needs to be considered a trigger point for the market. A move above that level could quickly get the top off to the $140 level and a move above there would open the door to $160.
If not, AMAT shares may remain rangebound with the highest at $120 until there’s another catalyst to drive it.
Do you have to invest $1,000 in Applied Materials right away?
Before you concentrate on Applied Materials, you’ll be wanting to listen to this.
MarketBeat keeps track of Wall Street’s top-rated and best performing research analysts and the stocks they recommend to their clients each day. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to purchase now before the broader market catches on… and Applied Materials wasn’t on the list.
While Applied Materials currently has a “Moderate Buy” rating amongst analysts, top-rated analysts consider these five stocks are higher buys.
Article by Thomas Hughes, MarketBeat