Expect Robust Q3 Results From Applied Materials, Says D.A. Davidson

In the last two quarters, the company's earnings topped by 4–6.3 percent, while in the preceding two quarters, results were in line with expectations.

Analyst Thomas Diffely expressed his confidence based on the industry fundamentals, which continue to strength. Aside from expecting robust results, he also sees the company guiding the fourth quarter either in line or above his revenue estimate of $2.8 billion and EPS of $0.44 and Street revenue expectations of $2.86 billion.

For the third quarter, the brokerage expects EPS of $0.47 on revenue of $2.85 billion, while the Street estimates EPS of $0.48 on revenue of $2.84 billion. The optimism is due to the continuous growth in 3D NAND activity apart from its strong market share in 10nm business.

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The analyst sees the company generating 80 percent of its revenue from display and 14 percent from SGG whereas AGS will deliver the remaining 7 percent.

Diffely said, "We are increasingly bullish on AMAT as a result of several waves of long-term growth (including a 3D NAND buildout, OLED adoption, and the rise of China's domestic semiconductor market)."

While seeing the immediate term to be fueled by traditional business, the brokerage expects OLED and the Chinese market to offer the biggest incremental growth in the upcoming years.

On Monday, the stock edged up by $0.47, or 1.74 percent, to $27.65 at time of writing.

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