Applied Materials Ends The Year With Another Beat And Raise Quarter

Applied Materials, Inc. AMAT reported Thursday a top- and bottom-line beat in its fiscal fourth quarter earnings report due to strong demand from semiconductor and display equipment.

The Analyst

KeyBanc Capital Markets' Weston Twigg maintains an Overweight rating on Applied Materials' stock with a price target boosted from $59 to $67.

The Thesis

Applied Materials' earnings came in "significantly" ahead of consensus estimates as demand trends were "very strong" across both the semiconductor and display equipment markets, Twigg said in a note. The company's momentum is likely to continue into 2018 as the company boosted its semiconductor equipment demand outlook above the $90 billion level for 2017 and 2018 combined, but this could prove to be conservative.

Applied Material's 2018 revenue guidance for the display business implies it will grow by more than 30 percent, which marks an improvement from management's prior projection of up at least 30 percent, the analyst said. The demand is being driven by mobile OLED and large Gen 10.5 TV facilities and this bullish outlook is believable despite a view that Samsung's OLED capital expenditure will decline in 2018.

The company's earnings report also shows the company continues to generate "meaningful" cash and ongoing return to shareholders will remain a focal point, Twigg said. As such, Applied Materials should be considered as "one of the best ways to invest in semiconductor equipment."

Price Action

Shares of Applied Materials were trading higher by more than 3 percent early Friday morning at $59.65, which is above the stock's 52-week high of $58.00.

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