APPLIED MATERIALS SHOWING BETTER TECHNICALS THAN INTEL - BUT STILL MAY BE DUE FOR A FALL

Applied Materials shareholders have been rewarded for their patience with over a ten percent gain in the last month. That, however, just offset the price losses that occurred in the previous thirty days. Unlike Intel, however, at least AMAT is trading near its highs. Can the company continue to trade higher? Let's take a look at AMAT from multiple angles to try to gain an edge on the stock… What the bulls see in AMAT… • Some cheap valuation metrics: o The P/E ratio of 17 which compares favorably to the S&P's P/E ratio of over 22 o The price-to-sales ratio of 3.31 • Net profit margin of 12.63% that spins off positive levered free cash flow of $1.16 billion annually • A clean balance sheet: o Cash reserves of $3.09 billion versus total debt of $1.95 billion o Debt-to-equity ratio of 24.12% o A current ratio of 2.75 What the bears see in AMAT… • Some pricey valuation metrics: o The market capitalization of $30.6 billion trumps the estimated enterprise value of $29.7 billion o A price-to-book ratio of 3.79 o The P/E ratio of 17 doesn't look cheap next to estimated revenue growth of only 7% The technical take of AMAT… Technicians note that Applied Materials shares may have just completed an "abc" upside correction (wave "B" of a larger "ABC") early last week when it peaked out at $25.57. That, according to some technicians, the next move lower will be the "C" wave of the larger "ABC" downside correction with the eventual target being down at $22.15. If $25.57 is broken on a closing basis, the "ABC" formation will be nullified. If $22.15 is broken on a closing basis (on the downside), then something more serious will be forming on the downside – with the next targets being $20.84 and $20.04. Overall… AMAT shares appear to be set to move lower – which would only be helped along by a continued consolidation / correction lower in the broader market. From $25.05, a drop down to $22.15 would be a welcome move for those looking to acquire AMAT.