Group 1: AI Investment Opportunities - The company aims to increase exposure to artificial intelligence (AI) in its investment portfolio, planning to buy two specific stocks in January 2025, one of which is already owned [2] - The global semiconductor manufacturing equipment market is projected to more than double in size by 2032, presenting significant growth opportunities for companies involved in this sector [7] Group 2: Sea Limited Performance - Sea Limited was the best-performing stock in the portfolio for 2024, with shares increasing by over 160% after a significant decline of more than 90% from its 2021 peak [3] - Sea's revenue grew by 30% in the third quarter of 2023, transitioning from a net loss of $144 million to a profit exceeding $150 million, indicating strong operational recovery [5] Group 3: Sea Limited Business Segments - The Shopee e-commerce business experienced a 25% year-over-year growth in gross merchandise volume and achieved adjusted EBITDA profitability for the first time [4] - Sea Money's digital finance platform expanded its loan portfolio by 70% while reducing the percentage of non-performing loans [4] - The Garena digital entertainment segment saw a 25% increase in both daily active users and bookings [4] Group 4: Applied Materials Overview - Applied Materials produces essential equipment for chipmakers like Nvidia and Intel, positioning itself as a leader in the specialized manufacturing equipment needed for complex AI chips [6][7] - The company has a growing revenue stream from servicing its equipment, which is increasingly important as manufacturing equipment becomes more complex [8] - Applied Materials is highly profitable and has a history of returning capital to shareholders through buybacks and dividends, with shares currently about 35% below their 52-week high [9]

Company Performance - Applied Materials (AMAT) closed at $173.65, reflecting a +1.63% change from the previous day's closing price, outperforming the S&P 500's daily gain of 0.12% [1] - Over the past month, AMAT shares increased by 0.86%, contrasting with the Computer and Technology sector's decline of 3.73% and the S&P 500's decline of 3.45% [2] - The upcoming earnings disclosure is anticipated to show an EPS of $2.28, indicating a 7.04% growth year-over-year, with quarterly revenue expected to reach $7.16 billion, up 6.74% from the previous year [3] Fiscal Year Estimates - For the entire fiscal year, earnings are projected at $9.37 per share and revenue at $29.34 billion, representing increases of +8.32% and +7.97% respectively from the prior year [4] Analyst Sentiment - Recent changes to analyst estimates for Applied Materials are crucial, as upward revisions indicate positive sentiment regarding the company's business operations and profit generation capabilities [5] - The Zacks Rank system, which reflects these estimate changes, currently assigns Applied Materials a rank of 3 (Hold), with the consensus EPS estimate having decreased by 1.16% in the past month [6][7] Valuation Metrics - Applied Materials has a Forward P/E ratio of 18.23, which is lower than the industry average of 25.28, suggesting a valuation discount [8] - The company also has a PEG ratio of 1.74, compared to the Electronics - Semiconductors industry average PEG ratio of 2.09, indicating favorable growth prospects relative to its valuation [8] Industry Context - The Electronics - Semiconductors industry, part of the Computer and Technology sector, holds a Zacks Industry Rank of 92, placing it in the top 37% of over 250 industries [9]

Company Performance - Applied Materials (AMAT) closed at $176.99, reflecting a -0.47% change from the previous trading day, underperforming the S&P 500 which gained 0.16% [1] - Over the past month, shares of Applied Materials have appreciated by 5.74%, outperforming the Computer and Technology sector's loss of 0.17% and the S&P 500's loss of 2.8% [2] Upcoming Earnings - Analysts expect Applied Materials to report earnings of $2.28 per share, indicating a year-over-year growth of 7.04%. Revenue is projected at $7.16 billion, up 6.74% from the prior-year quarter [3] - For the full year, Zacks Consensus Estimates project earnings of $9.37 per share and revenue of $29.34 billion, reflecting changes of +8.32% and +7.97% respectively from the previous year [4] Analyst Estimates and Rankings - Recent modifications to analyst estimates for Applied Materials reflect short-term business trends, with positive revisions indicating analyst optimism about the company's profitability [5] - The Zacks Rank system, which assesses estimate changes, currently ranks Applied Materials at 3 (Hold), with the consensus EPS estimate moving 1.16% lower over the last 30 days [6][7] Valuation Metrics - Applied Materials is trading at a Forward P/E ratio of 18.97, which is a discount compared to the industry average Forward P/E of 27.81. The PEG ratio stands at 1.81, compared to the industry average of 2.13 [8] Industry Context - The Electronics - Semiconductors industry, part of the Computer and Technology sector, has a Zacks Industry Rank of 148, placing it in the bottom 42% of over 250 industries [9]

Company Overview - The account is managed by Noah's Arc Capital Management, which aims to provide Wall Street-level insights to main street investors [1] - The research focus is primarily on 20th-century stocks (old economy) undergoing a 21st-century transformation, with occasional coverage of companies that facilitate such transformations [1] - The firm seeks innovations in business models that can lead to significant stock price changes [1] Analyst Position - The analyst holds a beneficial long position in AMAT through stock ownership, options, or other derivatives [2] - The article expresses the analyst's own opinions and is not influenced by compensation or business relationships with mentioned companies [2] Author Information - Noah Cox, the managing partner of Noah's Arc Capital Management, is the main account author [3] - The views expressed in the article are not necessarily reflective of the firm's views [3] - The content is for informational purposes only and not intended as investment advice [3] Platform Disclosure - Seeking Alpha's disclosure emphasizes that past performance is not indicative of future results [4] - The platform does not provide investment recommendations or advice regarding the suitability of investments [4] - Views expressed may not reflect those of Seeking Alpha as a whole, and analysts are third-party authors, including both professional and individual investors [4]

Core Viewpoint - Applied Materials (AMAT) has seen a significant decline in stock value, down 37% from its all-time high, primarily due to fears of U.S. export restrictions to China, a key market for the company [1][4]. Group 1: Market Dynamics - The U.S. and China are imposing restrictions on semiconductor sales to gain advantages in national security, particularly in defense and AI [2]. - Applied Materials is central to this conflict, providing advanced equipment for semiconductor manufacturing, which is crucial for companies like Nvidia [3]. Group 2: Revenue Composition - Revenue from China constituted 44% of Applied Materials' overall revenue in fiscal 2023 Q4, compared to a historical average of around 30%, and 37% in the recently ended fiscal 2024 [4]. - Concerns arise regarding the potential loss of a significant revenue stream if export restrictions to China are enforced [5]. Group 3: Future Growth Prospects - The combined revenue from Taiwan, South Korea, and the U.S. accounted for 51% of Applied Materials' revenue last quarter, indicating potential to offset losses from China [5]. - The U.S. government is promoting domestic semiconductor manufacturing, with projected spending in the tens to hundreds of billions over the next decade, which will likely benefit Applied Materials [11]. Group 4: Financial Performance and Shareholder Returns - Applied Materials has returned nearly 500,000% to shareholders since its IPO, with a commitment to return 80% to 100% of future free cash flow through buybacks and dividends [7][12]. - The company has reduced its share count by 33% over the last decade, enhancing earnings and dividends per share, and currently trades at a P/E ratio just below 19 [12]. Group 5: Investment Outlook - The current sell-off presents a buying opportunity, as demand for Applied Materials' equipment is expected to rise with the increasing need for advanced computer chips [8]. - AI data center spending is surging, necessitating advanced chips that require Applied Materials' technology for production [14]. - The anticipated growth in AI and reshoring demand could compensate for any revenue losses from China [15].

Applied Materials (NASDAQ: AMAT ) stock has had its ups and downs in 2024 as the company has ridden the AI wave higher and then also been knocked down by the reality of operating results not matching thatTo follow me click the "Follow" button! (Easy right?) Hi there, thanks for coming to my profile page! My name is Kumquat Research (but you can call me Jeremy) and I've been writing for Seeking Alpha on and off for going on ten years now, beginning with my inaugural published piece during my first year of co ...

Company Overview - Applied Materials is the largest semiconductor equipment company by revenue and has the most diversified market reach [2] - The company has seen its stock retreat over 32% from all-time highs in July, despite the AI boom driving demand for leading-edge chips and HBM memory [2] - The semiconductor equipment industry is highly consolidated, with only one or two options for each step in the manufacturing process, giving companies like Applied Materials significant competitive advantages [3] - The semiconductor industry has grown faster than the economy over time, with increasing chip demand across consumer and enterprise devices, further accelerated by AI [4] - Applied Materials has benefited from the increasing capital intensity of leading-edge semiconductor production, leading to high margins and returns on capital [5] Recent Downgrade and Concerns - Morgan Stanley downgraded Applied Materials earlier this month, citing concerns about China's declining demand due to new sanctions and the pull-forward of equipment orders by Chinese producers [6][7] - Non-AI chip manufacturing segments are not recovering as expected, with foundries outside of TSMC dialing back growth aspirations, particularly Samsung facing technology execution issues [8] - Morgan Stanley predicts a "transition" year for Applied in 2025, with the wafer fab equipment industry expected to decline by 6%, though some segments may grow [9] Investment Opportunity - Despite the downgrade, Applied Materials is trading at around 20 times trailing earnings, making it a potentially solid buy [10] - The company's services business, tied to its installed base, is expected to grow annually, potentially offsetting a mid-single-digit decline in new equipment sales [11] - Share repurchases and strong cash generation could keep EPS flat or even growing in a downturn, with the company holding over $8 billion in cash against $6 billion in debt [12] - Consensus estimates project Applied's EPS to grow to $9.50 this fiscal year, up from $8.65 in fiscal 2024, placing the stock at 18 times next year's estimates, a below-market multiple [13] - Long-term secular drivers for the wafer fab equipment market remain intact, including AI, complex chip architectures, and countries seeking leading-edge production domestically [14]

The semiconductor equipment leader's business is heating up again.Applied Materials (AMAT 0.16%), one of the world's largest suppliers of semiconductor manufacturing equipment, has been a great long-term investment. Over the past 10 years, its stock rallied more than 600% and generated a total return of over 700%. The S&P 500 generated a total return of 260% during the same decade.Applied Materials is a linchpin of the expanding semiconductor sector. Its growth is cyclical, but its revenue still rose at a c ...

Backlog and Revenue - Semiconductor Systems segment backlog as of October 27, 2024, is $8,259 million, down from $11,127 million in 2023, representing a 25% decrease[20] - Applied Global Services segment backlog increased to $6,767 million, a 31% increase from $5,162 million in 2023[20] - Total backlog as of October 27, 2024, is $15,873 million, down from $17,171 million in 2023, indicating a 7.5% decline[20] - Approximately 31% of the total backlog is not expected to be filled within the next 12 months[20] - New export rules and regulations are expected to reduce backlog by approximately $549 million[20] - Net revenue for fiscal 2024 was $27,176 million, an increase of 2% compared to $26,517 million in fiscal 2023[118] - The Semiconductor Systems segment generated $19,911 million in revenue, accounting for 73% of total revenue, with a 1% increase from $19,698 million in fiscal 2023[118] - Applied Global Services (AGS) segment revenue rose to $6,225 million, a 9% increase from $5,732 million in fiscal 2023[118] - Display segment revenue increased to $885 million, up 2% from $868 million in fiscal 2023, driven by higher investments in display fabrication equipment[120] - Revenue from customers in China surged by 40% to $10,117 million, reflecting increased investments in semiconductor equipment[121] Financial Performance - Gross margin improved to 47.5% in fiscal 2024, up from 46.7% in fiscal 2023, primarily due to lower material and manufacturing costs[118] - Operating income for fiscal 2024 was $7,867 million, an increase of $213 million from $7,654 million in fiscal 2023[118] - Net income for the fiscal year was $7,177 million, compared to $6,856 million in 2023, representing a growth of 4.7%[187] - Basic earnings per share (EPS) for 2024 was $8.68, up from $8.16 in 2023, while diluted EPS increased to $8.61 from $8.11[187] - The company reported a comprehensive income of $7,226 million for 2024, an increase from $6,841 million in 2023, driven by various factors including unrealized gains on investments[190] Expenses and Investments - Research, development, and engineering (RD&E) expenses rose to $3,233 million, an increase of $131 million from $3,102 million in fiscal 2023, due to additional headcount[122] - Operating expenses for marketing and selling increased to $836 million, up $60 million from $776 million in fiscal 2023[122] - General and administrative expenses increased to $961 million, reflecting higher share-based compensation and professional fees[122] - Capital expenditures for fiscal year 2024 totaled $1,190 million, compared to $1,106 million in 2023[200] Workforce and Employee Development - As of October 27, 2024, the company employed approximately 35,700 regular full-time employees, with 45% in the Asia-Pacific region, 43% in North America, and 12% in Europe/Middle East[32] - The global workforce composition is 79.2% male and 20.6% female, with 19.8% of the U.S. workforce being underrepresented minorities[33] - The company plans to conduct an all-employee survey in fiscal 2025 to measure engagement and inclusion, benchmarking against large technology companies[36] - The company invests in employee development through a 70/20/10 learning model, focusing on on-the-job learning, social collaboration, and formal training[35] - The ability to attract and retain key employees is critical for the company's success, with competition for talent being a significant challenge[79] Risks and Regulatory Environment - The company is subject to various international laws affecting trade policies, export regulations, and intellectual property, which could impact competitiveness[30] - The company faces risks from global trade issues, including changes in trade policies and export regulations, which could adversely impact operations and competitiveness[50] - The U.S. government has imposed additional export regulations on semiconductor technology sold in China, limiting market access and increasing competition[50] - The geopolitical landscape, including political instability and trade disputes, poses risks to the company's operations and supply chain[54] - The company is subject to various global regulatory risks, including compliance with laws related to financial disclosures, environmental regulations, and cybersecurity, which could adversely impact business operations and financial condition[90] Cash Flow and Financial Position - Cash and cash equivalents as of October 27, 2024, were $8,022 million, up from $6,132 million on October 29, 2023[132] - Cash provided by operating activities for fiscal 2024 was $8,677 million, remaining relatively flat compared to $8,700 million in 2023[135] - Cash used in investing activities was $2,327 million in fiscal 2024, compared to $1,535 million in 2023[136] - Cash used in financing activities was $4,470 million in fiscal 2024, an increase from $3,032 million in 2023[138] - The company has $6.2 billion in aggregate principal amount of senior unsecured notes outstanding as of October 27, 2024[83] Sustainability and Environmental Impact - There is a focus on reducing energy usage and improving sustainability in manufacturing operations, which is critical for future growth[59] - The company maintains preventative programs for environmental, health, and safety regulations, regularly monitoring compliance[30] - Implementation of sustainability strategies may incur additional costs, and failure to meet sustainability targets could harm the company's reputation and performance[91] - The company is exposed to risks associated with expanding into new and related markets, requiring additional resources and new sales strategies[68] Shareholder Returns - A total of approximately $8.9 billion remains available for future stock repurchases under the company's stock repurchase program, which was authorized for $10.0 billion in March 2023[110] - The company has repurchased a total of 7.6 million shares during the fourth quarter of fiscal 2024, with an average price of $190.89 per share[110] - The company declared dividends of $1.52 per common share in 2024, up from $1.22 per share in 2023, reflecting a 24.6% increase[197]

Applied Materials, Inc. (AMAT) presents an enticing valuation opportunity, trading at a forward P/E of 17.67X. This is significantly below the Zacks Electronics - Semiconductor industry average of 29.95X and the S&P 500’s 22.85X.Image Source: Zacks Investment ResearchThe stock also trades at a lower P/E multiple than its peers, including ASML Holding (ASML) , Lam Research (LRCX) and KLA Corporation (KLAC) . ASML Holding, Lam Research and KLA Corporation currently have a forward 12-month P/E multiple of 28.1 ...