Applied Materials gains on strong guidance, FQ3 earnings beat; analysts sees more room for outperformance

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Applied Materials Inc (NASDAQ:AMAT) rose more than 3% in premarket Thursday trading.

Applied Materials announced adjusted EPS of $1.90 on revenue of $6.43 billion. Analysts polled by Investing.com anticipated EPS of $1.74 on revenue of $6.15B. Semiconductor systems, the company’s largest business, fell 1.2% to $4.68B.

“Applied Materials executed well in our fiscal third quarter, with revenue and earnings at the high end of our guidance range,” said Gary Dickerson, president and CEO.

“Over the past several years, we have focused our strategy and investments on key technologies to accelerate the Internet of Things and AI era, enabling us to consistently deliver strong results in 2023 and positioning Applied Materials for sustainable outperformance.”

Looking ahead, the company guided Q4 adjusted EPS in a range of $1.82 to $2.18 on net sales of approximately $6.51B, give or take $400M, compared with consensus estimates of $1.59 and 5.87B, respectively.

Summit Insights analysts said the company remains positioned to outperform in the long term.

“While we do understand that the exist some risk of a possible pullback by its Chinese customers, we believe AMAT remains well-positioned to benefit from the upturn in the WFE spending in 2H24 and 2025 due to the increased capital intensity for future advanced process nodes in both logic and memories once its major customers resume their capex spending,” the analysts said in a note.

Berenberg analysts raised the target by $25 to $175 per share on the sustained demand.

“We believe that the incremental demand for extra capacity expansion will drive continued stable demand for equipment from China over the next two years at least,” they wrote.

(Additional reporting by Senad Karaahmetovic)