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Applied Materials (AMAT)
NASDAQ:AMAT
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Applied Materials
(NASDAQ:AMAT)
78Outperform
Positive Factors
Market Growth Potential
Leading-edge foundry and logic utilization rates are nearing 100%, with Applied Materials expected to capture over 50% of the serviceable available market share, indicating significant potential for growth.
Shareholder Value
Applied Materials has announced a $10 billion share repurchase program, indicating strong capital allocation and shareholder value enhancement.
Negative Factors
Contract Expiration
The expiration of certain services contracts in China could pose a slight headwind to Applied Global Services in the future.
Export Controls
The impact of updated US export controls is expected to result in a $400M revenue reduction in FY25.
Applied Materials (AMAT) vs. S&P 500 (SPY)
Market Cap
$123.13B
Dividend Yield1.06%
Average Volume (3M)8.71M
Price to Earnings (P/E)19.6
Beta (1Y)1.80
Revenue Growth4.45%
EPS Growth-10.01%
CountryUS
Employees36,000
SectorTechnology
Sector Strength57
IndustrySemiconductors
Share Statistics
EPS (TTM)7.64
Shares Outstanding812,440,860
10 Day Avg. Volume8,399,915
30 Day Avg. Volume8,711,118
Financial Highlights & Ratios
PEG Ratio3.33
Price to Book (P/B)N/A
Price to Sales (P/S)4.47
Price to Cash Flow (P/CF)33.40
P/FCF Ratio56.80
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$203.03Price Target Upside33.97% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering20
Applied Materials Business Overview & Revenue Model
Company DescriptionApplied Materials, Inc. is a global leader in providing materials engineering solutions used to produce virtually every new chip and advanced display in the world. The company operates primarily in the semiconductor, display, and related industries. Its core products and services include equipment, services, and software used in the fabrication of semiconductor chips and flat panel displays, as well as in the manufacturing of solar photovoltaic products.
How the Company Makes MoneyApplied Materials generates revenue primarily through the sale of manufacturing equipment to semiconductor and display industries. The company's revenue model revolves around several key streams: sales of semiconductor systems, which include equipment used in the fabrication of integrated circuits; sales of display and adjacent market equipment, which involve tools used in the production of flat panel displays and other related applications; and services, which include maintenance, upgrades, and other support services for their installed base of equipment. Significant factors contributing to its earnings include ongoing technological advancements in semiconductor manufacturing, strategic partnerships with leading semiconductor and electronics manufacturers, and a focus on research and development to maintain its competitive edge in the market.
Applied Materials Financial Statement Overview
Summary
Applied Materials demonstrates strong financial health with consistent revenue growth, solid profitability margins, and a robust balance sheet. Despite slight declines in free cash flow, the company's cash position supports strategic investments and debt management.Income Statement
Applied Materials shows strong financial performance with consistent revenue growth from $25.785 billion in 2022 to $27.635 billion TTM, indicating a robust demand for its products. The gross profit margin is solid at 47.7% TTM with a commendable net profit margin of 22.9%, highlighting effective cost management and profitability. EBIT and EBITDA margins are healthy at 29.2% and 30.3% respectively, demonstrating operational efficiency.89
Very Positive
Balance Sheet
The balance sheet is robust, with a debt-to-equity ratio of 0.34 indicating a conservative leverage strategy. Return on equity is strong at 34.1%, showcasing effective use of equity capital. The equity ratio is 55.9%, reflecting a stable financial structure with a solid equity base.85
Very Positive
Cash Flow
Cash flow metrics reveal a stable financial position with a free cash flow of $5.935 billion TTM, although there is a slight decrease from the previous year. Operating cash flow to net income ratio is 1.15, demonstrating strong cash generation relative to net income. Free cash flow to net income ratio is 0.93, indicating efficient cash utilization despite a decrease in free cash flow growth.80
Positive
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 27.64B | 27.18B | 26.52B | 25.79B | 23.06B | 17.20B | Gross Profit |
| 13.19B | 12.90B | 12.38B | 11.99B | 10.91B | 7.69B | EBIT |
| 8.07B | 7.87B | 7.65B | 7.79B | 6.89B | 4.37B | EBITDA |
| 8.49B | 8.26B | 8.17B | 8.23B | 7.59B | 4.84B | Net Income Common Stockholders |
| 6.34B | 7.18B | 6.86B | 6.53B | 5.89B | 3.62B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 2.58B | 9.47B | 6.87B | 2.58B | 5.46B | 5.74B | Total Assets |
| 10.94B | 34.41B | 30.73B | 26.73B | 25.82B | 22.35B | Total Debt |
| 205.53M | 6.26B | 6.00B | 5.54B | 5.45B | 5.45B | Net Debt |
| -1.65B | -1.76B | -133.00M | 3.55B | 457.00M | 97.00M | Total Liabilities |
| 3.41B | 15.41B | 14.38B | 14.53B | 13.58B | 11.78B | Stockholders Equity |
| 7.54B | 19.00B | 16.35B | 12.19B | 12.25B | 10.58B |
| Cash Flow | Free Cash Flow | ||||
| 5.93B | 7.49B | 7.59B | 4.61B | 4.77B | 3.38B | Operating Cash Flow |
| 7.28B | 8.68B | 8.70B | 5.40B | 5.44B | 3.80B | Investing Cash Flow |
| -2.78B | -2.33B | -1.53B | -1.36B | -1.22B | -130.00M | Financing Cash Flow |
| -5.10B | -4.47B | -3.03B | -7.04B | -4.59B | -1.34B |
Applied Materials Technical Analysis
Neutral
151.55
Price Trends
151.70
Negative
163.47
Negative
178.83
Negative
Market Momentum
-1.68
Negative
55.37
Neutral
88.36
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AMAT, the sentiment is Neutral. The current price of 151.55 is above the 20-day moving average (MA) of 141.28, below the 50-day MA of 151.70, and below the 200-day MA of 178.83, indicating a neutral trend. The MACD of -1.68 indicates Negative momentum. The RSI at 55.37 is Neutral, neither overbought nor oversold. The STOCH value of 88.36 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for AMAT.
Applied Materials Risk Analysis
Applied Materials disclosed 24 risk factors in its most recent earnings report. Applied Materials reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Applied Materials Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $91.68B | 19.77 | 55.36% | 1.25% | 20.33% | 31.89% | |
79 Outperform | $92.30B | 28.99 | 96.81% | 0.91% | 12.19% | 20.80% | |
78 Outperform | $123.13B | 19.65 | 35.19% | 1.06% | 4.45% | -10.01% | |
76 Outperform | $77.73B | 16.72 | 10.10% | 0.59% | 71.05% | ― | |
69 Neutral | $96.51B | 62.26 | 4.43% | 1.92% | -19.28% | -44.00% | |
59 Neutral | $10.74B | 10.21 | -6.69% | 3.04% | 7.44% | -10.92% | |
46 Neutral | $87.43B | ― | -18.66% | 2.33% | -3.97% | -562.40% |
* Technology Sector Average
Performance Comparison
AMAT
Applied Materials
151.55
-51.99
-25.54%
ADI
Analog Devices
194.59
-5.98
-2.98%
INTC
Intel
20.05
-10.99
-35.41%
KLAC
KLA
694.61
-13.00
-1.84%
LRCX
Lam Research
71.42
-20.45
-22.26%
MU
Micron
79.78
-34.06
-29.92%
Applied Materials Earnings Call Summary
Earnings Call Date: Feb 13, 2025 | % Change Since: -17.57% | Next Earnings Date: May 15, 2025
Earnings Call Sentiment Positive
The earnings call conveyed a generally positive sentiment with record-breaking revenue and growth, substantial advancements in AI and packaging, and significant shareholder returns. However, there are notable challenges, including trade restrictions with China impacting revenues and a decline in DRAM sales. The company's innovation and market positioning remain strong, but geopolitical and market-specific challenges present headwinds.Highlights
Record-Breaking Revenue and Growth
Applied Materials delivered record revenues in Q1 FY2025, surpassing the prior high set last quarter, with total net sales of approximately $7.2 billion, up 7% year over year.
Strong Performance in Leading-Edge Foundry Logic
Foundry logic saw a 20% growth, driving semiconductor system sales to $5.36 billion for Q1, up 9% year over year.
Advanced Packaging and AI Innovations
Applied Materials captured more than half of the advanced packaging market and is on track to double revenues over the next several years, with significant innovations in energy-efficient AI solutions.
Positive Outlook for Non-GAAP Earnings
Non-GAAP earnings per share grew by 12% year over year to a record $2.38, driven by revenue growth, profitability improvements, and share repurchases.
Increased Shareholder Returns
The company distributed $1.6 billion to shareholders through $1.3 billion of share repurchases and $326 million of dividends.
Lowlights
Impact of Trade Restrictions with China
The ability to serve the China market is constrained, with an estimated revenue impact of $400 million in fiscal 2025 due to updated trade rules, resulting in expected service revenue declines.
Challenges in DRAM Sales
Semiconductor system sales were partially offset by a decline in DRAM sales, as prior year sales to customers in China did not repeat.
Moderate Investment in ICAPS
There is a more measured level of investment in the ICAPS nodes following strong spending in 2023 and 2024, leading to a decline in sales for this segment.
Company Guidance
During the first quarter of fiscal 2025, Applied Materials reported record revenues, surpassing previous highs, with total net sales of approximately $7.2 billion, reflecting a 7% year-over-year increase. The company achieved a non-GAAP gross margin of 48.9%, marking a 100 basis point improvement from the previous year and the highest quarterly gross margin since fiscal 2000. Non-GAAP EPS reached a record $2.38, up 12% year-over-year, supported by semiconductor systems sales of $5.36 billion, a 9% increase, and applied global services revenue of $1.59 billion, up 8%. Despite facing a $400 million revenue impact due to trade restrictions with China, Applied Materials anticipates continued growth, with Q2 revenue projected at $7.1 billion, representing another 7% year-over-year rise, and non-GAAP EPS expected at $2.30, up 10%. The company is focused on leveraging its leadership in advanced semiconductors and materials engineering to navigate major technology inflections in AI, foundry logic, DRAM, and advanced packaging, with plans to double its packaging revenue over the next few years.Applied Materials Corporate Events
Private Placements and FinancingBusiness Operations and Strategy
Applied Materials Secures New $2 Billion Credit Facility
Positive
Feb 27, 2025
On February 24, 2025, Applied Materials, Inc. entered into a new five-year $2.0 billion revolving credit facility with Bank of America, replacing a previous $1.5 billion agreement set to expire in 2026. This strategic financial move enhances Applied’s credit capacity, potentially strengthening its operational flexibility and market position.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.