Applied Materials (AMAT) AI Stock Analysis

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Applied Materials

(NASDAQ:AMAT)

76Outperform

Applied Materials receives a strong overall score, driven by robust financial performance and strategic positioning in the semiconductor industry. Record revenues and innovations in AI and packaging are key strengths, but technical indicators show bearish momentum. Valuation is fair, with a reasonable P/E ratio and dividend yield. The new credit facility further supports the company's growth potential.

Positive Factors

Market 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 Returns

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

$103.14B

Dividend Yield1.26%

Average Volume (3M)7.38M

Price to Earnings (P/E)16.6

Beta (1Y)1.71

Revenue Growth4.45%

EPS Growth-10.01%

CountryUS

Employees36,000

SectorTechnology

Sector Strength40

IndustrySemiconductors

Share Statistics

EPS (TTM)7.64

Shares Outstanding812,440,860

10 Day Avg. Volume7,560,618

30 Day Avg. Volume7,380,387

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

$205.38

Price Target Upside61.78% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering22

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

Very Positive

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.

Balance Sheet

Very Positive

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.

Cash Flow

Positive

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.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
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

Technical Analysis Sentiment

Negative

Last Price126.95

Price Trends

50DMA

162.39

Negative

100DMA

168.43

Negative

200DMA

185.57

Negative

Market Momentum

MACD

-4.81

Positive

RSI

35.29

Neutral

STOCH

20.64

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AMAT, the sentiment is Negative. The current price of 126.95 is below the 20-day moving average (MA) of 148.73, below the 50-day MA of 162.39, and below the 200-day MA of 185.57, indicating a bearish trend. The MACD of -4.81 indicates Positive momentum. The RSI at 35.29 is Neutral, neither overbought nor oversold. The STOCH value of 20.64 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
LRCX	78 Outperform	$75.85B	17.96	50.42%	1.51%	13.21%	27.25%
KLAC	77 Outperform	$76.61B	24.25	96.81%	1.09%	12.19%	20.80%
AMAT	76 Outperform	$103.14B	16.61	35.19%	1.26%	4.45%	-10.01%
MU	75 Outperform	$72.33B	15.56	10.10%	0.71%	71.05%	―
ADI	71 Outperform	$81.64B	52.49	4.43%	2.28%	-19.28%	-44.00%
Sector *	57 Neutral	$18.54B	9.84	-14.38%	2.71%	5.07%	-23.65%
INTC	52 Neutral	$86.56B	―	-18.31%	2.52%	-2.08%	-1212.72%

* Technology Sector Average

Performance Comparison

AMAT

Applied Materials

126.95

-80.34

-38.76%

ADI

Analog Devices

164.60

-28.88

-14.93%

INTC

Intel

19.85

-17.74

-47.19%

KLAC

KLA

604.62

-80.09

-11.70%

LRCX

Lam Research

59.09

-36.58

-38.24%

Micron

64.72

-57.66

-47.12%

Applied Materials Earnings Call Summary

Earnings Call Date: Feb 13, 2025 | % Change Since: -30.95% | 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.