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Applied Materials To Host Investor Day; Will Long-Term Guidance Boost AMAT Stock?

Applied Materials Inc

Applied Materials Inc

AMAT


$0.53


0.46%


42%

IBD Stock Analysis

  • Stock needs another week to forge a new flat base with entry of 124.60
  • Shares now are finding support at 21-day exponential moving average
  • Early entry would be 117.95 if shares can get above last week’s high

Industry Group Ranking

Emerging Pattern

Flat Base

* Not real-time data. All data shown was captured at
1:35PM EDT on
03/15/2021.

Applied Materials (AMAT) is the IBD Stock of the Day as the chip equipment maker nears an entry point. The company plans to host an investor day April 6, where updated long-term guidance could be a catalyst for AMAT stock.




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AMAT stock hit an all-time intraday high of 124.50 on Feb. 19 as fiscal first-quarter sales topped estimates and set a new quarterly record. Shares in Applied Materials consolidated a bit before pulling back to their 10-week moving average.

AMAT stock bounced off the 10-week line last week, a bullish signal. The 10-week line graphs the average closing price over the 10 past trading weeks.

Santa Clara, Calif.-based Applied Materials needs one more week to forge a new flat base with an entry of 124.60. It takes six weeks to form a new base. Shares were off a fraction to 113.76 in recent trades.

In addition, AMAT stock is finding support at its 21-day exponential moving average. If it can get above last week’s high, then 117.95 would be an early entry.

AMAT Stock: Financial Targets To Be Updated At Investor Day

At its April 6 investor day, Applied Materials plans to discuss “its longer-term market outlook, opportunities, strategies, product and technology roadmaps, and financial targets.”

Demand for chips for cloud-computing data centers, 5G wireless handsets and automobiles has been driving sales of its equipment. Demand for flat-panel display manufacturing gear, however, has been weak.

In its first fiscal quarter ended Jan. 31, AMAT stock reported sales of $5.16 billion, up 24% from a year earlier. Earnings rose 42% to $1.39 per share.

For the April quarter, Applied Materials expects to earn an adjusted $1.50 a share, up 69%, on sales of $5.39 billion, up 36%.

On its first-quarter earnings call, Applied Materials said it expects the worldwide wafer fab equipment market to grow above 18% to around $70 billion in 2021. That market rose 16% to $60 billion in 2020.

Applied Materials: Buyback A Possible Catalyst?

“AMAT expects to continue to gain share in 2021 supported by new innovative products and their unique product breadth,” AMAT stock analyst Vivek Arya from Bank of America said in a recent note to clients.

Applied Materials’ customers include foundry Taiwan Semiconductor Manufacturing (TSM), which is on the IBD Leaderboard. Leaderboard is IBD’s curated list of leading stocks that stand out on technical and fundamental metrics.

“Considering that the company will be generating significant cash flow on expanding margins, the potential for share count reduction from buybacks is yet another lever for upside,” RBC Capital Markets analyst Mitch Steves said in his report to clients.

According to IBD Stock Checkup, AMAT stock has a Relative Strength Rating of 84 out of a possible 99. The best stocks own ratings above 80.

Further, AMAT stock holds an Accumulation/Distribution Rating of B-plus.

AMAT Stock: Will U.S. Government Subsidize Chip Manufacturing?

The rating analyzes price and volume changes in a stock over the past 13 weeks of trading. The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ means heavy institutional buying, while E means heavy selling. Think of the C grade as neutral.

IBD’s Electronics-Semiconductor Equipment industry group ranks No. 25 out of 197 groups tracked. Choosing highly rated stocks from leading industry groups in a confirmed stock market uptrend generally increases your chances of making profits in growth stocks.

One plus for AMT stock and other semiconductor manufacturing gear makers is that memory-chip sales rebounded in late 2020. Meanwhile, capacity constraints at foundries such as Taiwan Semi have resulted in a chip shortage in the automotive industry.

The shortage could prompt the U.S. government to provide subsidies to support domestic chip manufacturing, thus affecting AMAT stock.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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