AMAT Stock Forecast: AMAT Delivers Best Quarter in its 50-Year History and It Is Just The Beginning

 The article was written by Aline Rzetelna, a Financial Analyst at I Know First

AMAT Stock Forecast

Founded in 1967, Applied Materials, Inc. is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. The Company operates through three segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. The company serves manufacturers of semiconductor wafers and chips, liquid crystal and other displays, and other electronic devices. Applied Materials, Inc. has its headquarteres in Santa Clara, California.

Summary:

  • Record Results for AMAT in the Third Quarter of Fiscal 2017
  • New Era of Artificial Intelligence
  • Optimistic Business and Financial Outlook for the Upcoming Periods
  • I Know First Bullish Forecast on AMAT

AMAT Delivers the Best Quarter in its 50-Year History

On August 17th, 2017, Applied Materials, Inc. released its third Quarter of Fiscal 2017 financial results and its business outlook. The company, which will celebrate 50 years on November 10, experienced record results in its third quarter ended July 30, 2017.

AMAT’s net sales grew by 33 percent, from $2.82 billion to $3.74 billion, in comparison with the same quarter of the previous year. The company increased its gross margin by 3.1 points to 45.4%. Moreover, its operating margin grew by 6.2 points to 27.3%. AMAT’s earnings per share almost doubled, increasing from $0.46 to $0.85.

On a non-GAAP adjusted basis, the company increased its gross margin by 2.9 points to 46.6 percent, grew operating margin by 5.9 points to 28.7%, in comparison with the third quarter of fiscal 2016, ended July 30. Furthermore, its non-GAAP adjusted earnings per share increased by 72% from $0.50 to $0.86.

According to Mr. Gary Dickerson, AMAT’s president and CEO, the company is experiencing tremendous momentum and has a very positive outlook for their future. Dickerson affirmed that their markets are growing with a broad set of demand drivers, and that the breadth of AMAT allows them to play a larger and more valuable role in advancing the innovation roadmap in semiconductor and display.

The company’s revenue and profits are at all-time highs. It generated a record $1.37 billion in cash from operations, which represented 36 percent of revenue, and returned $482 million to shareholders through stock repurchases and cash dividends.

(Source: Applied Materials Inc.)

AMAT Is Focusing on Enabling Artificial Intelligence

Applied Materials, Inc. hosted its Analyst Day, on September 2017. This included presentations on the Company’s industry, business outlook, strategies, opportunities, products and financial targets.

AMAT is focusing on enabling the Artificial Intelligence Era. Accordingly, the Company will explore the future of computing in the era of AI. As the president and CEO stated: ” the move to AI signals a new era for computing that is driving major changes to the way logic and memory chips are designed and manufactured”, and consequently, “new materials and innovative chip architectures will increasingly be needed to bring faster processors and more efficient memory to market, and Applied Materials is at the foundation with the solutions that enable the AI revolution.”

Since AMAT remains in a strong position in this market and continues to get stronger, the Company can actively contribute on this path to the new Era of AI. As Dickerson stated: “New technology inflections like A.I. and Big Data will increase demand for high-performance semiconductor processing and storage. With the industry’s broadest and most innovative technologies, Applied Materials helps accelerate customer roadmaps by enabling chips and displays to be built in entirely new ways.”

AMAT Business Outlook

Applied Materials forward-looking statements for the fourth quarter of fiscal 2017 includes fairly optimistic results. The Company is expecting its net sales to be in the range of $3.85 billion to $4.0 billion. It is also expecting a non-GAAP adjusted diluted earnings per share to be in the range of $0.86 to $0.94.

Moreover, the Company unveiled a new three-year financial outlook. AMAT is targeting non-GAAP adjusted earnings per share of $5.08 for fiscal 2020 as Internet of Things (IoT), Big Data and AI are transforming major industries.

Dan Durn, AMAT’s senior vice president and CFO, said in a statement: “As we enter a new era in computing, market demand is stronger, customer profitability is increasing and capital intensity is rising. These factors combined with the strength of our diverse portfolio give us confidence in our ability to deliver higher levels of profitable growth.”

AMAT expects to deliver a 15% compound annual growth in the next three years, in Services. In the Display segment, AMAT is expecting 23% compound annual growth over the same period. Furthermore, AMAT announced a new share repurchasing program, authorizing up to an additional $3 billion in repurchases.

I Know First Bullish Forecast on AMAT

Therefore, I rate AMAT as a buy. This is consistent with the bullish forecast from I Know First and can be explained by the fact that not only has the company experienced record results in its 50-year history, but also because it is still focusing on investing in the new era of Artificial Intelligence, Big Data and Internet of Thing (IoT).

Past I Know First Success with AMAT

I Know First Algorithm has previously predicted the stock movement for AMAT such as in this forecast from August 2nd, 2016 to August 2nd, 2017. The forecast showed a bullish signal of 336.44 and a predictability of 0.66 and achieved a return of 64.54% in 1 year.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

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