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Applied Materials Inc - Stock Quote AMAT

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Morningstar's Applied Materials Inc Stock Analysis

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Supply Chain Headwinds Intensifying as AMAT Navigates Turbulent Q2; Shares Undervalued, $142 FVE

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

Wide-moat Applied Materials reported fiscal second-quarter revenue below the midpoint of management’s guidance and our expectations. The primary culprit was COVID-19-related shutdowns in China that delayed around $150 million of revenue in the quarter. Since most of its peers’ quarters did not include April, we think Applied Materials' results appear worse given the shutdowns had the biggest impact during the final month of its fiscal quarter. We suspect the likes of Lam Research, ASML, and KLA are also facing similar headwinds that will negatively weigh on their respective June quarter results. Despite supply challenges, wafer fab equipment, or WFE, demand remains robust. Management expects unconstrained demand for WFE to be over $100 billion in 2022. Given the firm’s backlog continues to grow, we have confidence in sequential growth over the rest of the year as supply improves. That said, we remain cautious of WFE spending slowing in 2023 as new capacity comes online and the ongoing chip shortage improves. We are maintaining our fair value estimate of $142 per share and view shares as attractive at current levels.

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Applied Materials Inc's Company Profile

Business Description

Applied Materials is the world's largest supplier of semiconductor manufacturing equipment, providing materials engineering solutions to help make nearly every chip in the world. The firm's systems are used in nearly every major process step with the exception of lithography. Key tools include those for chemical and physical vapor deposition, etching, chemical mechanical polishing, wafer- and reticle-inspection, critical dimension measurement, and defect-inspection scanning electron microscopes.

3050 Bowers Avenue, P.O. Box 58039
Santa Clara, CA, 95052-8039
T +1 408 727-5555
Sector Technology
Industry Semiconductor Equipment & Materials
Most Recent Earnings Jan 31, 2022
Fiscal Year End Oct 31, 2022
Stock Type Cyclical
Employees 27,000

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