Applied Materials stock has had a strong year so far, outperforming its semiconductor industry peer Texas Instruments. The company is set to report its Q3 FY’24 results soon, with expected earnings of $2.02 per share and revenues of about $6.68 billion. The semiconductor industry appears to be turning around, with indicators such as memory prices picking up and increased demand from the artificial intelligence space. Applied Materials stands to benefit from its diversified offerings in the semiconductor production value chain.
In comparison, Texas Instruments stock has shown gains of 21% year-to-date, while Arista Networks, another company benefiting from generative AI, has seen its stock surge by about 300% over a 3-year period. Arista is part of the Trefis High Quality Portfolio, which has outperformed the S&P 500 each year over the same period. Applied Materials stock, currently trading at $212 per share, has a valuation of about 25x projected FY’24 earnings, which is slightly high compared to historical levels. Trends such as generative AI and cloud computing could drive the stock’s performance, but the company may face pressure due to its exposure to China and tightening restrictions on the export of semiconductor technology.
Despite a somewhat mixed year for Applied Materials due to weak semiconductor capital spending post-Covid lockdowns, the company posted better-than-expected Q2 FY’24 results with revenue flat at $6.65 billion and earnings at $2.09 per share. The semiconductor downcycle appears to have bottomed out, with factors such as memory prices picking up and increased demand from AI driving growth. Applied Materials is well positioned in the industry with its diversified offerings in the semiconductor production value chain.
As the semiconductor industry continues to show signs of recovery, Applied Materials is likely to benefit from trends such as generative AI and increased demand from the artificial intelligence space. While the company faces pressure from its exposure to China and tightening restrictions on semiconductor technology exports, it remains well positioned to capitalize on emerging opportunities in the industry. With its Q3 FY’24 results approaching, investors will be watching closely to see how Applied Materials performs in the current market environment.
Investors looking for market-beating portfolios may consider Trefis’ High Quality Portfolio, which includes companies such as Arista Networks that have shown significant gains over the last few years. While Applied Materials stock may face some challenges in the near term, its strong position in the semiconductor industry and exposure to emerging trends could drive future growth. With a valuation slightly below its current market price, Applied Materials stock presents an interesting investment opportunity for those looking to capitalize on the ongoing transformation in the semiconductor industry.
