Applied Materials: A Fairly Valued Compounding Machine

GuruFocus.com09-20

Applied Materials Inc. (NASDAQ:AMAT) is one of the largest and most dominant semiconductor equipment manufacturers in the world. The company's products and services are critical to the production of ...

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(NASDAQ:AMAT) is one of the largest and most dominant semiconductor equipment manufacturers in the world. The company's products and services are critical to the production of ...</p>\n\n<a href=\"https://finance.yahoo.com/news/applied-materials-fairly-valued-compounding-140002027.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"TQQQ","symbol_name":"纳指三倍做多ETF","start_time":0,"source_url":"https://finance.yahoo.com/news/applied-materials-fairly-valued-compounding-140002027.html","article_id":"2468629507","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/mHO4jqCPPL.5DgWoUOD5aA--~B/aD00NDt3PTE3NTthcHBpZD15dGFjaHlvbg--/https://media.zenfs.com/en/us.finance.gurufocus/7e4979eac9972311502d81ecfa952746"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2468629507","pubTimestamp":1726840802,"columns":[],"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"Applied Materials Inc.  is one of the largest and most dominant semiconductor equipment manufacturers in the world. The company's products and services are critical to the production of semiconductor chips. By relentlessly focusing on innovation, technology and customer needs, it has been a market leader in the semiconductor equipment industry for decades.I think Applied Materials possesses many of the characteristics of a great business, as evidenced by the GF Score of 94 out of 100.Going forward, Applied Materials will greatly benefit from artificial intelligence boom, the technological advancement in semiconductor chips and the increasing penetration of semiconductor chips in electrical vehicles and green energy systems. The stock looks fairly valued currently, but in the long term will continue to be a compounding machine.Applied Materials has three reportable segments: Semiconductor Systems, Applied Global Services and Display and Adjacent Markets. According to the company's most ","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"TQQQ":"纳指三倍做多ETF","LU1035773651.USD":"AB SICAV I - GLOBAL VALUE PORTFOLIO \"AD\" (USD) INC","LU1815333072.USD":"THREADNEEDLE (LUX) GLOBAL FOCUS \"AUP\" (USD) INC","IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","03165":"华夏欧优股对冲","LU0348723411.USD":"ALLIANZ GLOBAL HI-TECH GROWTH \"A\" (USD) INC","AMAT":"应用材料","LU1974910355.USD":"Allianz Thematica Cl AMg DIS USD","IE00BFSS7M15.SGD":"Janus Henderson Balanced A Acc SGD-H","BK4585":"ETF&股票定投概念","PSQ":"纳指反向ETF","QLD":"纳指两倍做多ETF","LU2271345857.HKD":"ALLIANZ GLOBAL SUSTAINABILITY \"AT\" (HKD) ACC","LU0238689110.USD":"贝莱德环球动力股票基金","KLAC":"科磊","ARKG":"ARK Genomic Revolution ETF","LU0792757196.USD":"TEMPLETON SHARIAH GLOBAL EQUITY FUND \"A\" (USD) ACC","LU2106854487.HKD":"ALLIANZ THEMATICA \"AMG\" (HKD) INC","LRCX":"拉姆研究","LU2360032135.SGD":"ALLSPRING GLOBAL EQUITY ENHANCED INCOME \"A\" (SGDHDG) INC","LU2360107168.USD":"BGF NEXT GENERATION TECHNOLOGY \"A4\" (USD) INC","ASML":"阿斯麦","LU0082616367.USD":"摩根大通美国科技A（dist）","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","LU2125154778.USD":"ALLSPRING GLOBAL EQUITY ENHANCED INCOME \"A\" (USD) INC",".IXIC":"NASDAQ Composite","LU1153585028.USD":"BGF GLOBAL LONG-HORIZON EQUITY  \"A4\" (USD) INC","BK4588":"碎股","SQQQ":"纳指三倍做空ETF","IE00BSNM7G36.USD":"NEUBERGER BERMAN SYSTEMATIC GLOBAL SUSTAINABLE VALUE \"A\" (USD) ACC","LU2125154935.USD":"ALLSPRING (LUX) WF GLOBAL EQUITY ENHANCED INCOME \"I\" (USD) INC","LU1267930813.SGD":"FRANKLIN TEMPLETON SHARIAH GLOBAL EQUITY \"AS\" (SGD) ACC","LU2237438978.USD":"Amundi Funds US Pioneer A2 (C) USD","IE0005OL40V9.USD":"JANUS HENDERSON BALANCED \"A6M\" (USD) INC","BK4581":"高盛持仓","IE00BQXX3D17.EUR":"GUINNESS GLOBAL INNOVATORS \"C\" (EUR) ACC","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","LU0158827948.USD":"ALLIANZ GLOBAL SUSTAINABILITY \"A\" (USD) INC","IE00BQXX3C00.GBP":"GUINNESS GLOBAL INNOVATORS \"C\" (GBP) ACC","QID":"纳指两倍做空ETF","LU1046421795.USD":"富达环球科技A-ACC","IE00BQXX3F31.USD":"GUINNESS GLOBAL INNOVATORS \"C\" (USD) ACC","LU1861215975.USD":"贝莱德新一代科技基金 A2","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","TOELY":"Tokyo Electron Ltd.","LU1951198990.SGD":"Natixis Thematics AI & Robotics Fund H-R/A SGD-H","LU1861220033.SGD":"Blackrock Next Generation Technology A2 SGD-H"},"translate_title":"应用材料公司：价值合理的复合机","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AMAT":1,"ARKG":1,"TOELY":1,"LRCX":1,"KLAC":1,".IXIC":0.75,"ASML":0.7,"PSQ":0.6,"QID":0.6,"QLD":0.6,"SQQQ":0.6,"TQQQ":0.6,"03165":0.6,"MNQmain":0.6,"NQmain":0.6},"content_text":"Applied Materials Inc. (NASDAQ:AMAT) is one of the largest and most dominant semiconductor equipment manufacturers in the world. The company's products and services are critical to the production of semiconductor chips. By relentlessly focusing on innovation, technology and customer needs, it has been a market leader in the semiconductor equipment industry for decades. \nI think Applied Materials possesses many of the characteristics of a great business, as evidenced by the GF Score of 94 out of 100. \n\n\nGoing forward, Applied Materials will greatly benefit from artificial intelligence boom, the technological advancement in semiconductor chips and the increasing penetration of semiconductor chips in electrical vehicles and green energy systems. The stock looks fairly valued currently, but in the long term will continue to be a compounding machine. \nBusiness overview\nApplied Materials has three reportable segments: Semiconductor Systems, Applied Global Services and Display and Adjacent Markets. According to the company's most recent annual report, the Semiconductor Systems segment accounted for 74% of total sales, while Applied Global Services accounted for 22%. \n\nThe Semiconductor Systems segment generates revenue from sales of equipment used to manufacture semiconductor chips. The following chart from the company's investor relations deck provides a snapshot of its product portfolio. \n\nThe demand for Applied Materials' equipment products is ultimately driven by the demand for electronic products such as smartphones, tablets and PCs, AI chips, data centers and the increasing penetration of semiconductor ships in electric vehicles and green energy power generation and storage systems. As the demand for downstream products is cyclical, revenue for the Semiconductor Systems segment shows high cyclicality as well. \nCompared to the cyclicality of the Semiconductor Systems segment, the revenue for the Applied Global Services segment is much more stable as service revenues are recurring revenues by nature. According to the company's most recent annual report, the Applied Global Services segment provides integrated solutions to optimize equipment and fab performance and productivity, including spares, upgrades, services, certain remanufactured earlier generation equipment and factory automation software for semiconductor, display and solar products. Demand for Applied Global Services' solutions are driven by our large and growing installed base of manufacturing systems, and customers' needs to shorten ramp times, improve device performance and yield, and optimize factory output and operating costs. \nThe Display and Adjacent Markets segment is the smallest segment in terms of revenue contribution. Segment revenue is also very cyclical because the demand for OLED products is cyclical . \nCompetitive positioning \nAs described above, Applied Materials has a product portfolio that spans across the fabrication process of semiconductor chips. On the company's investor relations website is a very good report on the worldwide wafer fabrication equipment market. The report includes details of the company's competitive position in each niche market. \nIn summary, the only process in which Applied Materials does not have a product offering is lithography, which is dominated by ASML Holdings (NASDAQ:ASML). In the deposition market, there are three niche markets, PVD, CVD and ALD. In the PVD market, there are only two companies in the space, Applied Materials and Japan's Ulvac. Applied Materials dominates this market. In the CVD market, there are three major players, Applied Materials, Lam Research (NASDAQ:LRCX) and Tokyo Electron (TOELY). Applied Materials and Lam Research each dominates different niches within the CVD market, while Tokyo Electron is number three in the space. In etching, there are four major players. Lam Research has a dominant position, followed by Tokyo Electron and Applied Materials. Hitachi also has a small presence in the etching market. In process control, KLA-Tencor (NASDAQ:KLAC) dominates. Applied Materials and ASML both have some presence in the market, but their market shares are not meaningful in comparison. \nFinancial analysis and valuation\nAccording to GuruFocus, Applied Materials has a profitability rank of 10 out of 10. It's noteworthy that in terms of profitability metrics, the company leads the peer group in return on assets and ranks third in net margin. Its revenue growth has outperformed its U.S peers such as Lam Research and KLA-Tencor, but lagged some of its international peers such as ASML Holdings, ASM International (XAMS:ASM), Lasertec (TSE:6920) and Naura (SZSE:002371). The company's earnings per share growth has outpaced its revenue growth, which is an indication of improvement in operating efficiency. \n\nIn terms of financial strength, Applied Materials has a score of 8 out of 10. The company's balance sheet is very healthy with a cash-to-debt ratio of 1.37 and debt-to-equity ratio of 0.35. Further, interest coverage of 32.60 times is more than sufficient. \n\nFrom the above analysis, it is quite clear that Applied Materials is a great business. However, the stock's valuation has probably reflected much optimism, indicated by its GF Value rank of 3 out of 10. Historically, the stock trades between 10 and 34 times of earnings with a median of 18.50 times. Currently the stock trades at 21.20 times earnings. It is not extremely expensive, but not very cheap either. \nRisk discussion\nFor Applied Materials, I think the biggest risk comes from China. The company has benefited from the country's huge infrastructure investment in the semiconductor industry. At the peak, China accounted for more than 45% of the company's business, according to Applied Materials Chief Financial Officer Brice Hill, who made remarks during the 2024 Morgan Stanley Technology, Media & Telecom Conference earlier this year. \nHowever, the Chinese government has ramped up support for domestic players such as Naura Technology and AMEC, both of which have made quite impressive progress on their own semiconductor equipment products in deposition and etching. The combination of government support and technological advancements by domestic players will inevitably lead to Applied Materials' market share loss in China in the next three to fie years. Whether the company can make up this loss of business from China from other parts of the world remains to be seen. \nConclusion\nApplied Materials has been a great compounding machine for many decades. I believe the company will continue to benefit from the secular tailwinds driven by artificial intelligence and the green energy transition. In the long term, the company will still be one of the most dominant players in the semiconductor equipment space. At the same time, it is facing increasing competition in China. At the current valuation, Applied Materials is neither expensive nor cheap. Patient value investors can wait for a better price. This article first appeared on \nGuruFocus.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2468629507"}