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Category: Stock Market and Applied Materials
Date: 16 September 2019 Stock Price: $51.35 We take a look at the 3rd quarter earnings release of their 2019 fiscal year of materials engineering firm, Applied Materials
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About Applied Materials
Applied Materials, Inc. (Nasdaq: AMAT) is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible the technology shaping the future.
We provide a comprehensive portfolio of semiconductor and display services designed to help customers meet their manufacturing challenges. From startup to fab expansion, from pilot lines to mass production, we have a service plan to ensure your tools and fab are operating at peak performance.
We provide a comprehensive portfolio of semiconductor and display services designed to help customers meet their manufacturing challenges. From startup to fab expansion, from pilot lines to mass production, we have a service plan to ensure your tools and fab are operating at peak performance.
Overview of Applied Materials' latest earnings report
The numbers we are interested in (for the quarter):
- Total revenue: $3.562 billion (down from $3.123 billion from the same quarter of the previous year)
- Revenues increased by 14% over the last 12 months
- Cost of revenues: $2.005 billion (down from $2.298 billion for the same quarter of the previous year)
- Cost of revenues decreased by -12.75% over the last 12 months
- Net income: $571 million (down from $1.061 billion for the same quarter of the previous year)
- Diluted earnings per share: $0.61 (down from $1.01 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 937 million (down from 1005 million for the same quarter of the previous year)
- Cash and cash equivalents: $3.014 billion
- Cash and cash equivalents per share: $3.21
- Cash and cash equivalents makes up 6.26% of AMAT's market capital
- Cash and cash equivalents makes up 15.9% of AMAT's total assets
- Accounts receivable: $2.373 billion
- Accounts receivable makes up 12.62% of AMAT's total assets
- Inventories: $3.539 billion
- Inventories makes up 18.82% of AMAT's total assets
- Shareholders equity in Nvidia: $8.116 billion
- Shareholders equity per Nvidia share: $8.66
- AMAT is trading at 5.92 times its shareholders equity. The number is relatively high as most firms trade at between 2 and 4 times their stockholders equity per share. However this is not nearly as high as Nvidia's.
- Cash generated from operations: $787 million
- Cash generated from operations per share: $0.83
Applied Materials' management commentary on the results and earnings guidance
SANTA CLARA, Calif., Aug. 15, 2019 — Applied Materials, Inc. (NASDAQ:AMAT) today reported results for its third quarter ended July 28, 2019
“Applied Materials is delivering solid financial performance in a market environment that remains challenging for the time being,” said Gary Dickerson, president and CEO. “We are excited about the company’s future opportunities and are fully funding our R&D programs to develop new products and capabilities that will accelerate customers’ roadmaps and underpin our growth in the years ahead.”
Business Outlook
In the fourth quarter of fiscal 2019, Applied expects net sales to be approximately $3.685 billion, plus or minus $150 million. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.72 to $0.80. This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.01 per share and includes net income tax benefit related to intra-entity intangible asset transfers of $0.03 per share, but does not reflect any items that are unknown at this time, such as any additional charges related to acquisitions or other non-operational or unusual items, as well as other tax related items, which we are not able to predict without unreasonable efforts due to their inherent uncertainty.
“Applied Materials is delivering solid financial performance in a market environment that remains challenging for the time being,” said Gary Dickerson, president and CEO. “We are excited about the company’s future opportunities and are fully funding our R&D programs to develop new products and capabilities that will accelerate customers’ roadmaps and underpin our growth in the years ahead.”
Business Outlook
In the fourth quarter of fiscal 2019, Applied expects net sales to be approximately $3.685 billion, plus or minus $150 million. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.72 to $0.80. This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.01 per share and includes net income tax benefit related to intra-entity intangible asset transfers of $0.03 per share, but does not reflect any items that are unknown at this time, such as any additional charges related to acquisitions or other non-operational or unusual items, as well as other tax related items, which we are not able to predict without unreasonable efforts due to their inherent uncertainty.
Applied Materials (NASDAQ: AMAT) stock price history
The image below, obtained from Google, shows the stock price history of Applied Materials (NASDAQ: AMAT) for the last 5 years. And its been a excellent 5 years for stockholders of AMAT. 5 years ago the stock was trading around $22.50 and today its trading at $51.35. Thats a 128.2% return provided by Applied Materials stock over the last 5 years. The stock of AMAT is also trading at a lot closer to its 52 week high than it its to its 52 week low, which is a clear indication that short term momentum and sentiment of the stock is positive.
Recent coverage of Applied Materials (NASDAQ:AMAT)
The extract below shows recent coverage of Nvidia as obtained from Zacks
A month has gone by since the last earnings report for Applied Materials (AMAT - Free Report) . Shares have added about 8.9% in that time frame, outperforming the S&P 500. Will the recent positive trend continue leading up to its next earnings release, or is Applied Materials due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Applied Materials Beats on Q3 Earnings and Revenues
Applied Materials delivered fiscal third-quarter 2019 non-GAAP earnings of 74 cents per share, which beat the Zacks Consensus Estimate by 4 cents and improved 5.7% sequentially. However, the figure declined 28.8% year over year. Net sales of $3.562 billion surpassed the Zacks Consensus Estimate of $3.526 billion and were within management’s guided range of $3.375-$3.675 billion. The figure improved marginally 0.6% from the previous quarter but decreased 14.4% from the year-ago quarter.
Year-over-year decline was owing to market uncertainties which in turn led to weak segmental performance. Moreover, softness in semiconductor and display markets on account of slowdown in memory and display customers’ spending was a major headwind. Nevertheless, the company witnessed solid momentum across United States and Taiwan.
Management remains optimistic about the price elasticity of NAND, which is expected to bolster the NAND customer spending in the near term. Further, demand for foundry logic is improving thanks to rising need for specialty nodes in automotive, power, IoT, communications and image sensor markets.
However, management continues to expect overall wafer fab equipment spending in 2019 to be down in the range of mid to high-teens. Further, the company’s expanding etch footprint bodes well for its semiconductor portfolio. Moreover, its strengthening momentum in conductor etch is aiding it in gaining traction in DRAM and NAND. Additionally, the company remains confident on its focus on research and development activities to develop new products
Read the full article here
A month has gone by since the last earnings report for Applied Materials (AMAT - Free Report) . Shares have added about 8.9% in that time frame, outperforming the S&P 500. Will the recent positive trend continue leading up to its next earnings release, or is Applied Materials due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Applied Materials Beats on Q3 Earnings and Revenues
Applied Materials delivered fiscal third-quarter 2019 non-GAAP earnings of 74 cents per share, which beat the Zacks Consensus Estimate by 4 cents and improved 5.7% sequentially. However, the figure declined 28.8% year over year. Net sales of $3.562 billion surpassed the Zacks Consensus Estimate of $3.526 billion and were within management’s guided range of $3.375-$3.675 billion. The figure improved marginally 0.6% from the previous quarter but decreased 14.4% from the year-ago quarter.
Year-over-year decline was owing to market uncertainties which in turn led to weak segmental performance. Moreover, softness in semiconductor and display markets on account of slowdown in memory and display customers’ spending was a major headwind. Nevertheless, the company witnessed solid momentum across United States and Taiwan.
Management remains optimistic about the price elasticity of NAND, which is expected to bolster the NAND customer spending in the near term. Further, demand for foundry logic is improving thanks to rising need for specialty nodes in automotive, power, IoT, communications and image sensor markets.
However, management continues to expect overall wafer fab equipment spending in 2019 to be down in the range of mid to high-teens. Further, the company’s expanding etch footprint bodes well for its semiconductor portfolio. Moreover, its strengthening momentum in conductor etch is aiding it in gaining traction in DRAM and NAND. Additionally, the company remains confident on its focus on research and development activities to develop new products
Read the full article here
Applied Materials (NASDAQ: AMAT) latest stock valuation
So based on the earnings report of Applied Materials (NASDAQ: AMAT) and their fiscal outlook provided for their 4th quarter of their 2019 fiscal year, what do we value Applied Materials (AMAT) stock at? Based on the earnings reported and the fiscal guidance provided our valuation model provides a target (full value) price for Applied Materials at $55.00 a stock. We therefore feel that the stock is undervalued and a good price long term fundamental or value investors should look to enter the stock at is at least 10% below our target (Full value) price. Thus a good entry point to buy into Applied Materials stock would be around $49.50 or below.