Core Insights - Applied Materials (AMAT) has been a strong long-term investment, with stock prices increasing over 600% in the past decade, significantly outperforming the S&P 500's 260% return [1] - The company is a key player in the semiconductor sector, with a compound annual growth rate (CAGR) of 12% in revenue and 26% in earnings per share (EPS) from fiscal 2014 to fiscal 2024 [2] Revenue Breakdown - In fiscal 2024, 73% of Applied Materials' revenue came from semiconductor systems, 23% from related services, and the remainder from display and adjacent markets [2] - Revenue growth for semiconductor systems was 26% in FY 2020, 43% in FY 2021, but slowed to 1% in FY 2024, reflecting a deceleration in growth after the pandemic-driven demand surge [3][4] Market Challenges - The company faced challenges due to cooling demand in the PC, smartphone, industrial, and automotive markets, alongside tightening export curbs affecting sales in China, which accounted for 37% of total revenue in fiscal 2024 [4][5] - The U.S. Department of Justice has scrutinized Applied Materials' sales to China's top chip foundry, SMIC, impacting its operations and funding applications [5] Future Growth Prospects - Analysts anticipate a new growth cycle starting in fiscal 2025, driven by demand for advanced AI chips and energy-efficient solutions [6][7] - Revenue and adjusted EPS are expected to grow by 9% and 10% respectively in fiscal 2025, and by another 8% and 13% in fiscal 2026 [8] Valuation and Returns - Applied Materials' stock is considered undervalued at 17 times forward earnings compared to ASML's 27 times and TSMC's 21 times [8] - The company has a history of returning cash to investors through buybacks and dividends, having repurchased nearly a third of its shares over the past decade, with a forward dividend yield of 0.9% [9]
Is Applied Materials Stock a Buy Now?