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Abhinav Davuluri

Abhinav Davuluri is a sector strategist for Morningstar.

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We note Applied and its peers have all called for strong growth in 2021, driven by record capital expenditure levels at TSMC and Intel as well as solid memory spending. Management expects Applied’s fourth-quarter revenue to be up 34% year over year at the midpoint, with momentum persisting into 2022. Consequently, we are raising our fair value estimate to $131 per share from $125.

We remain optimistic on Intel’s IDM 2.0 strategy to get its manufacturing back on track and develop a more meaningful foundry strategy. Nonetheless, we expect the next few quarters to be challenging.

Intel reported fourth-quarter results that significantly exceeded its guidance, primarily due to stronger than expected PC demand related to the ongoing work- and learn-from-home trends stemming from COVID-19. Due to the impending CEO transition from Bob Swan to Pat Gelsinger (effective Feb. 15), management did not elaborate on its outsourcing plans or provide full-year guidance.