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Santa Clara, California-based Applied Materials, Inc. (AMAT) provides manufacturing equipment, services, and software to the semiconductor, display, and related industries. Valued at $144.7 billion by market cap, AMAT is the world’s largest semiconductor fabrication equipment supplier, and its customers include semiconductor wafer and integrated circuit manufacturers, flat panel liquid crystal displays, solar photovoltaic cells and modules, and other electronic devices manufacturers.
Companies worth $10 billion or more are generally described as “large-cap stocks.” AMAT effortlessly fits that bill, with its market cap exceeding this mark, underscoring its size, influence, and dominance within its industry. AMAT holds a commanding position in the semiconductor equipment market, particularly in deposition technology. Continuous investments in research and development back its leadership and ensure that its technology remains cutting-edge, providing a competitive advantage in a rapidly evolving industry.
Despite its notable strengths, AMAT slipped 31.7% from its 52-week high of $255.89, achieved on Jul. 10. Over the past three months, AMAT stock declined 20.1%, underperforming the VanEck Semiconductor ETF’s (SMH) 14.8% dip during the same time frame.
In the longer term, shares of AMAT rose 9.3% on a YTD basis and climbed 20.1% over the past 52 weeks, underperforming SMH’s YTD gains of 23% and 38.9% returns over the last year.
To confirm the bearish trend, AMAT has traded below its 50-day moving average since mid-July and 200-day moving averages since late August.
AMAT's performance is affected by weak momentum in Taiwan and Europe, market volatility, high inflation, and geopolitical tensions. Concerns over U.S. interest rate policies and recession fears add further pressure. U.S. export restrictions to China, along with Beijing's push for self-sufficiency and the phase-out of foreign chips from telecom networks by 2027, present significant challenges to AMAT's market opportunities.
On Aug. 15, AMAT reported its Q3 results, and its shares closed down more than 1% in the following trading session. Its revenue stood at $6.8 billion, up 5.5% year over year. The company’s adjusted EPS increased 11.6% year over year to $2.12. Despite meeting market expectations for Q4 revenue projections of $6.5 billion to $7.3 billion, shares dropped over 1% as investors were disappointed by the lack of a stronger boost from AI spending.
AMAT’s rival, Lam Research Corporation (LRCX), lagged behind the stock, with a 6.3% loss on a YTD basis and 5.4% gains over the past 52 weeks.
Wall Street analysts are moderately bullish on AMAT’s prospects. The stock has a consensus “Moderate Buy” rating from the 31 analysts covering it, and the mean price target of $237.59 suggests a potential upside of 36% from current price levels.
On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
