What is Applied Materials?
Applied Materials provides manufacturing equipment, services and software to the semiconductor, display and related industries. They aren't the chip maker, or the person who sells the chips inside the phones. They are the folks that make the equipment to makes the chips.
AMAT is comprised of 4 divisions, but the semiconductor division is the key, both in terms of sell kit and supporting clients.
-
Semiconductor Systems: 60% of sales. Applied Materials develops equipment used during the stages of semi production such as atomic layer deposition, chemical vapor deposition, physical vapor deposition, rapid thermal processing, etc.
-
Global Services: just over 20% of sales. The Applied Global Services (AGS) group offers equipment installation support and warranty extended support, as well as maintenance support. AGS also offers new and refurbished equipment, as well as upgrades and enhancements for installed base equipment.
-
Display and Adjacent Markets: just under 20%. AGS combined with an existing business in 2006 to start production of displays. Applied Materials focuses on LCD and OLED displays.
-
Energy and Enviro. Solutions: 2% of sales.
Who are the customers?
85% of Applied’s sales are from Asia. Just 10% of sales come from the US and Europe.
TSMC in Taiwan making up over 15% of sales. Samsung, Micron and Intel over 10% each. This means that their top 4 clients make up over 51% of sales.
Numbers
In 2015, Applied posted revenue of $9.66bn. In 2016 this number grew to $10.83bn. And last year the company reported revenue of $14.54bn, which grew at a rate of 34.6% YoY.
Total cash flow has grown more than 100% annually since 2014, and in AMAT’s conference call last quarter, CEO Gary Dickerson stated that he expects revenue to keep increasing at a 22% compounded rate through FY 2020.
With a PE ratio of 15.16 and an analyst mean price target of $68, I see no reason to buy in. This is one of the strongest companies I’ve seen in awhile, and the management is great about talking to shareholders.
One of AMAT’s closest competitors LRCX just reported last week and absolutely CRUSHED their estimates.
Earnings are Valentine’s Day AMC.
Though last week dragged this stock down, it has immense upside. AMAT hit $60 after its last very positive ER. If this week is green, I expect AMAT to lead the semi sector!
This May still face some price action to the downside if the market trends down this week, However, this is a GREAT long term play.
Interviews with Applied Materials' CEO (Worth Watching):
https://www.youtube.com/watch?v=Nfw21blIJfE
https://www.cnbc.com/2017/02/16/applied-materials-ceo-were-in-the-early-innings-of-oled-adoption-into-smartphones.html https://www.youtube.com/watch?v=k4wc6jdQs0w
Submitted February 11, 2018 at 01:20PM by itschrisolson http://ift.tt/2soZDqc
