5 Reasons To Buy Applied Materials

Goldman Sachs continued to retain a Buy rating on Applied Materials, Inc. AMAT though the firm removed the stock from the Conviction List citing limited catalysts for immediate term. The stock also outperformed the semiconductor coverage by 1100 basis points in the last three months.

The firm pointed out that the stock jumped 75 percent after adding to its Conviction list on February 2 compared to the broader index of S&P 500's 14 percent.

The following are five reasons to buy the stock:

• Fundamentals of the industry remain strong and semi capex forecast continued to be bullish
• Market share are expected to increase from 18.7/19.2 percent in 2014/15 to 22 percent in fiscal year 2016 driven by new products
• Meaningful upside is seen on Applied Material's long-term model fueled by two new products providing traction
• Faith on the management to deliver growth and returns by prioritizing investments
• Estimation for calendar year 2017/18 are above consensus

In a note, analysts Toshiya Hari and Charles Long said, "We continue to be bullish on the semi capex outlook, primarily predicated upon competitive dynamics in foundry/logic (transition to 10/7nm) and NAND (transition from planar to 3D). Note AMAT recently guided CY17 WFE to be up 3% from CY16."

The brokerage cited competition, mix in product changes, and pause in NAND capex are the possible risk factors.