By Senad Karaahmetovic
Applied Materials (NASDAQ:AMAT) reported stronger-than-expected earnings for its fiscal fourth quarter, sending its shares about 4% higher in the pre-market.
AMAT posted adjusted EPS of $2.03 on revenue of $6.75 billion, beating the consensus of $1.75 on revenue of $6.45B. The adjusted gross margin came in at 46%, easily ahead of the consensus at 44.2%.
“Applied Materials delivered a strong finish to our fiscal year with record performance, and we remain focused on mitigating supply chain constraints and doing everything possible to meet customer demand,” said Gary Dickerson, President, and CEO of Applied Materials.
For this quarter, Applied Materials sees adjusted EPS between $1.75 and $2.11, topping the analyst consensus of $1.83. Revenue is seen at $6.7B (the midpoint), again higher than the $6.45B consensus.
“Though we are slowing the rate of spending growth in the near term amid geopolitical and macroeconomic challenges, we are making the strategic investments to win the major technology inflections that will enable Applied to outgrow the semiconductor market,” Dickerson added.
Summit Insights analysts upgraded AMAT to Buy as they believe WFE spending cuts are priced in.
“We believe AMAT's customers' Capex adjustments are manageable for AMAT and will primarily be completed by mid-2023. We expect AMAT to benefit from the upturn in the WFE spending primarily due to the increased capital intensity for more advanced process nodes in both DRAM and foundry,” they said in a note.
Evercore ISI analysts noted that the backlog is at “record levels” again. They raised the price target on AMAT stock to $120 per share, from $100.
“We reiterate our Outperform rating with the vision that too conservative consensus estimates into 1HCY23 will be beatable and enable shares to continue to move higher. And, importantly, when we likely do see a soft patch for Silicon, the memory market likely bottoms and investors will quickly pivot to underwriting faster WFE growth into CY24,” the analysts wrote.